Posted on 03/19/2002 9:05:31 AM PST by Willie Green
For education and discussion only. Not for commercial use.
NEW YORK (Reuters) - Wall Street investment bank Credit Suisse First Boston is poised to unveil another round of layoffs as early as this week, this time cutting into its upper echelon of bankers, sources familiar with the situation said.
The layoffs, which sources said could include dozens of the firm's managing directors in investment banking, comes as new investment banking head Adebayo Ogunlesi looks to streamline costs and return the company to profitability amid a moribund merger environment.
Company executives also hope it culminates the dramatic reversal of fortunes at CSFB, a unit of Switzerland's Credit Suisse Group Inc. ,that followed the blockbuster $11.5 billion acquisition of Wall Street rival Donaldson, Lufkin & Jenrette in 2000.
The merger has worked in some ways, but the vast majority of former top DLJ rainmakers have walked since the deal closed.
In fact, fewer than a dozen of the 150 or so former DLJ managing directors still remain at CSFB, two sources said, despite a $1.2 billion retention pool established to combat such defections the company was bought.
A CSFB spokesman said no decisions have been made at this time with regard to future layoffs.
CSFB already cut 2,500 jobs, or 9 percent of its overall staff, at the end of last year, bringing its worldwide employee level down to 25,100 at the end of December.
The DLJ merger, which some believed would catapult CSFB into the upper-tier of global investment banks, has been a success in many ways.
The bank routinely ranks as a leading underwriter of high-yield debt and asset-backed securities, and through last week stood as the leading advisor on global merger deals in 2002.
But the company has also recorded a string of operating losses since the union, including a $1 billion loss during the fourth quarter of 2001, prompting it to shed staff.
The loss of DLJ executives has been particularly painful, since retaining talent is generally considered essential during such an acquisition, as the most important assets of a investment bank are its people, who have experience and connections.
But CSFB paid DLJ stockholders $90 per share, meaning many DLJ rainmakers could cash out their stock and still take top positions with other firms. Several high-profile DLJ executives left soon after the deal closed, despite the retention pool.
Among the departures were Hal Ritch, who had been co-head of M&A for DLJ and left for Citigroup Inc. unit Salomon Smith Barney. James Neissa left CSFB for UBS Warburg in March 2001, joining Ken Moelis as co-head of its Americas investment banking unit. Moelis himself was another CSFB defector.
CSFB has been quite open about its desire to cut costs under Chief Executive John Mack who has, among other things, already moved to reduce headcount and rein in the rich salaries and bonuses earned by the company's top bankers like technology star Frank Quattrone.
The company had already targeted reducing expenses by $1 billion this year.
"We don't have a revenue problem, we have a cost problem," Mack said last week, when the parent company reported 2001 results in Zurich. "I don't have a specific headcount target, but I am confident that we will be taking more heads out in investment banking."
CSFB, like rivals such as Goldman Sachs Group Inc. and Merrill Lynch & Co. Inc. , has struggled amid weak stock markets as companies avoided mergers and stock offerings, two key Wall Street revenue drivers.
Almost every major investment bank on Wall Street has already announced significant reductions in staff, including J.P. Morgan Chase & Co. , which cut 8,000 jobs last year, and Merrill Lynch, which offered severance packages to most of its nearly 70,000 employees.
CSFB reported a net loss of $961 million last year. Excluding charges related to restructuring and the settlement of an initial public offering investigation, the unit had an operating profit of $338 million. The company warned revenues will fall further in 2002.
Investment banking revenue last year was $2.8 billion, compared with $3.7 billion in 2000. By contrast, Goldman's investment banking revenue was $3.8 billion in 2001 and Morgan Stanley investment banking revenue was $3.4 billion.
Still, despite the weaker investment banking conditions, Goldman still earned $2.31 billion last year. Merrill Lynch, which cut 9,000 jobs in the fourth quarter alone, managed to earned $700 million, including $1.7 billion in restructuring in Sept. 11-related charges.
Definition of a depression: When you lose your job.
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