From big bonuses to layoffs!
Saturday December 23, 2:11 pm Eastern Time
As Wall St Loses Fizz, Job in Doubt
By Joan Gralla
NEW YORK (Reuters) - Wall Street's banks and brokerages had looked set for another banner year, but sinking equities markets, job cuts and profit disappointments could take some of the fizz out of financiers' bonuses -- and New York City's economy.
There have been rosy predictions that Wall Street would turn in another stunning year in paying bonuses, which for stars, can make up 85 percent of their annual compensation and range from $1 million to $20 million.
But executive recruiters, who often hear quickly from their clients if bonuses are not as big as they believe they deserve, are far from confident the total amount banks and brokerages pay in bonuses will increase.
``I think they're going to be flat to down 10 percent compared to last year,'' Brian Sullivan, who runs Heidrick & Struggles' global financial arm, told Reuters. ``The reality is last year was a gangbuster year and this year has had a horrible second and third quarter.''
A spokeswoman for New York State's comptroller on Tuesday said H. Carl McCall stood by his early December forecast. McCall predicted the city's world-leading financial sector this year would set a record high for employee bonuses, paying a total of $13.3 billion, up from about $11.8 billion in 1999.
But while the bonus picture is far from clear, there is no doubt that job cuts already are taking effect.
Merger partners J.P. Morgan & Co. (NYSE:JPM - news) and Chase Manhattan Corp. (NYSE:CMB - news) are tossing around most of the pink slips; they announced last week a 5,000-job cutback. Among those to announce job cuts this week is Prudential Securities, the brokerage arm of Prudential Insurance Co. of America, which will cut 160 jobs at its investment banking unit. Bank of America Corp. (NYSE:BAC - news) also plans to ax 100 jobs in its investment and corporate banking unit, according to published reports.
New York City's prospects in the past have mirrored Wall Street's though the city's latest upswing has shown strength in lots of sectors -- from tourism to Internet services.
The city's 178,000 securities industry employees account for only 5 percent of its workforce. But because Wall Street pays more than other sectors, the industry throws off 17 percent of municipal revenues. A downturn could hit everything from the city's sky-high real estate prices to sales of luxury goods, such as jewelry and high fashion.
While the froth might be settling fast, the present situation differs from 1998 when top brokerage house Merrill Lynch & Co Inc. (NYSE:MER - news) laid off 5 percent of its workforce amid a crisis in emerging markets.
Although the national economy has slowed, it still is growing. And Wall Streeters' ability to rejig their careers -- perhaps by running corporate finance for a manufacturer -- means financial experts probably will not be standing in line for unemployment checks.
Sullivan estimated a majority of those displaced will find new jobs fairly easily, with maybe half slipping back into chairs elsewhere on Wall Street.
``I think really what this means is similar to the national economy, some of the hyper-growth and the real boom is going out of the economy,'' Robert Kurtter, an analyst with Moody's Investor Services, said.
``But the bottom is not falling out, there's still growth and likely to be growth in the coming year.''
WHO'S HOT
Who remains hot on Wall Street is easy to determine. It's so-called franchise players, people who help rake in the big bucks, such as the equities analyst whose research lands a brokerage a blockbuster merger deal, or the inventor of a creative new type of derivative.
Their bonuses likely will rise handsomely; no one wants to take the risk of losing stars or up-and-comers.
Salesmen and money managers who keep clients happy also could see their bonuses rise. Wall Street companies are competing fiercely to manage as much money as possible -- for both institutions and the well-to-do, defined as people worth at least $3 million to $5 million.
``I think because of the aggressiveness of getting market share I see that (bonuses) as very much either status quo or even going beyond that,'' Anthony Riotto, chairman, Riotto Jazylo Co. Inc., said. ``Their clients don't want to see new faces,'' the recruiter added.
WHO'S GETTING A PINK SLIP
Any sector that had a tough time making money this year, such as fixed-income in general and junk bonds in particular, is vulnerable to job and bonus cuts, headhunters agreed. So are money managers, research analysts and traders whose livelihoods hinge on the Nasdaq stock market, which has dropped more than 50 percent from its record highs in March.
Other experts also are vulnerable. ``A number of equity research analysts have not had stellar years. It can be in any particular industry...where there are less financings, some of the more mature industries,'' Sullivan said.
Some solid performers will get knocked off their perches through no fault of their own, perhaps because of mergers.
``Some of these people are very good, they might have faced a challenge in that there was an equally good person sitting in the other chair,'' John Rogan, who heads Russell Reynolds Associate's global banking recruiting arm, said. He noted that mergers mean duplicate positions are being cut back.
Rogan spotted another trend: while geeky areas, such as structured finance and credit or equity derivatives are still hot, experts in less esoteric products might not be. ``The plain vanilla products have become a commodity.''
WHO'S HIRING, WHO'S IN DEMAND
Electronic bond trading companies, plain vanilla companies, consulting firms and dot-coms -- provided they have solid business plans -- all are hiring financial experts who have lost their jobs on Wall Street, executive recruiters say.
So are large European financial institutions that having muscled their way into London's financial center, now have set their sights on New York City.
Although economists, fund managers and research analysts can be Wall Street's most visible employees, thanks to television interviews, less glamorous systems, accounting and legal experts, are enjoying steady demand.
``From my perspective, and I only do operations, financial control and product control, every one of these worlds is definitely in need of good people, because (firms) continue to trade more and more, and continue to trade complex products,'' said Ken April of Westchester, N.Y.-based recruitment company April International.
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