LEH and JPM - layoffs next week

http://www.reuters.com/article/coMktNews/idUKWEN546220080505?rpc=11 NEW YORK, May 5 (Reuters) - Lehman Brothers Holdings Inc (LEH.N: Quote, Profile, Research) and JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) are planning layoffs, CNBC reported on Monday. Lehman Brothers will announce another round of layoffs next week, CNBC’s Charlie Gasparino said, adding that he does not have specific numbers. A Lehman spokesman declined to comment. JPMorgan Chase is also planning job cuts, both to make space for incoming Bear Stearns Cos (BSC.N: Quote, Profile, Research) employees and to accomodate the fact that many banking businesses are slowing, Gasparino said. A JPMorgan Chase spokesman declined to comment. (Reporting by Dan Wilchins; Editing by Braden Reddall)

JPM Asset Management NYC Fixed Income Desk is blowing up. 900 bps under bench in their core product I heard.

Wow!? How do you blow it by that much with fixed income!?!

Lots of core strategies are several hundred bps under bench in the past year or so. Most of that comes from overweight securitized assets. If I find anything more about JPM AM situation I will post…

Emerging market debt, corporate and mortgage… and if you know the fixed income market, you will understand, 800bps is deiniftely possible. Senior secure loan is 55c per dollar… we’re talking about AAA rating stuffs, not those sub-investment grade craps. I remember seeing a guy from CS telling me, they are so happy that they got our of all the sub-investment grade stuffs before the whole sub-prime kicks in and now they have money to spend on those AAA rating oversold instruments.

I know you can lose a lot of money with fixed income but my point is how could they be so far off their benchmark? Isn’t that some sort of industry average? What the heck is their benchmark?

Dinesh, is your sot safe?

UBS is laying off people too

Yup, below is the UBS story. UBS to Cut 5,500 Jobs After First-Quarter Loss PARIS — UBS, the largest Swiss bank, said Tuesday that it expected to cut about 5,500 jobs, including 2,600 in its investment banking unit, as it announced a first-quarter loss of about $10.9 billion. The investment banking job cuts, which come on top of the 1,500 positions eliminated since October, will fall most heavily on businesses in the United States and British, the chief executive, Marcel Rohner, said in a conference call. The bank also said it was planning to sell $15 billion of distressed mortgage assets to the asset management company BlackRock and that it would close the bank’s institutional municipal bond business in the United States. UBS, which has been the hardest hit of all European financial institutions in the credit crisis that began last year, reported a first-quarter loss of 11.5 billion Swiss francs. That was in line with its estimates, but it represented a sharp turn from a net profit of 3 billion francs in the first quarter a year ago. UBS wrote down $19 billion in soured subprime mortgage securities and other investments in the first quarter, bringing its total write-downs since the beginning of the credit crisis to about $38 billion. Banks globally have written down more than $300 billion since the start of the crisis. “Recently credit spreads have started to normalize,” Mr. Rohner said. “Yet in 2008 we expect markets to continue to be difficult.” That, he said, will “weigh on revenues in coming quarters.” He said UBS would “continue to rebuild” its investment banking unit and its balance sheet in the second quarter, but the bank did not provide earnings guidance. Its shares, which have fallen by 50 percent in the last 12 months, fell 4.8 percent in Zurich afternoon trading Tuesday. “The market is wondering whether the worst is really over,” said Gerhard Schwarz, an equity strategist at Unicredit in Munich. UBS “is not giving any guidance for this year and next, so there’s some disparity between people saying the worst is over and other indications that the credit crisis is in full swing.” UBS said it expected “a continuing unfavorable global economic climate, deleveraging by institutional and private investors, slower wealth creation and lower trading and capital market activity.” Jerker Johansson, who joined as chief executive of UBS’s investment bank a month ago, said in a conference call that he would undertake a review in which each business would have to prove that it would be able to meet profit targets and that it could grow. The job cuts will be across all levels of seniority, and “people affected by this are in the process of being informed,” Mr. Johansson said. “While client activity slowed, revenue opportunities are to grow, with the fastest growth to come from Asia, Latin America, Russia and Eastern Europe.” Mr. Rohner said bank planned to add staff in some areas, primarily client advisers in the wealth management division. The bank said that its efforts to clean up its balance sheet had begun to pay off. “We can see tangible effects as a result of our initial responses to the losses,” Mr. Rohner said in a statement. “While our exposure is still subject to swings in market conditions, we see market demand for these securities returning in certain areas and at the current level of valuations. Asked in the conference call what was the nominal value of the assets that UBS was selling to BlackRock, executives said it was about $22 billion, suggesting that UBS was selling the assets — mainly subprime and Alt-A mortgage securities — at a discount of $7 billion, or about 32 percent. Irfan Younus, an analyst at NCB Stockbrokers in London, said: “They are actively deleveraging, which is a positive, but it may lead to lower valuations especially in investment banking in the long-term because of the lower growth on equity.” Mr. Rohner said that he was “pleased” with UBS’s progress in reducing the risks on its balance sheet, but he said more had to be done in that area. UBS said that as a result of its recent capital increases, its Tier 1 capital ratio, a measure of financial strength, would have been 11.8 percent at the end of the March, “among the highest in the industry.” Shareholders last month approved a set of measures to raise capital, mainly a rights offer of about $15 billion. In February, they had approved plans to raise $13 billion in new capital. Mr. Rohner said he expected the wealth-management business to take “a few quarters” to recover. The bank said the global wealth management businesses had net new money inflows of 5.6 billion francs in first quarter, but in Switzerland, clients withdrew 1.9 billion francs. The global asset management recorded net outflows of 16.5 billion francs. The bank said it was reorganizing the business to regaining business. David Jolly reported from Paris and Julia Werdigier from London.

do layoffs usually come at the bottom? before the bottom? after the bottom?

Mantra on Wall Street- Boom-Hire left right and center Bust-Fire left right and center

anishcandy Wrote: ------------------------------------------------------- > Dinesh, is your sot safe? I am a consultant and they don’t have to publish in the newpapers to fire me out. It can happen over a cup of coffee too. Anyway’s how’s L2 happening? I think if I don’t study for yet another day then the RED-PANIC button will self trigger in me!

It’s true, no core fixed income product is really supposed to miss the mark by 8%. The benchmark is typically the Lehman Agg, which is roughly 50% govt guaranteed, 25% corp and 25% mortgage. However the agg doesn’t include any subprime, high yield corps, EM, etc. Also managers don’t usually hold anywhere near the treasuries that are in the agg. So when you get a risk downturn, basically everything that’s not in the agg underperforms, while treasuries outperform, which is bad news for a typical manager. What gets you to underperformance of 8% is probably having 80% of your portfolio perform in line with the index, and having the other 20% get priced down from par to $60. Not many assets have done that (and definitely not senior loans as a group). They probably got caught with a 20% position in some combination of bad off-index prime mortgages, Alt-A, subprime, mortgage insurers, other smaller financials, or maybe some CDO/CLO exposure or private placements. That should have been seen as an unacceptable risk position beforehand. Or maybe their on-index corp and mtge exposure contributed ~300 bps of that underperformance and they only had a 12% allocation to off index stuff. Either way, to pull off 8% underperformance you pretty much had to be max long risk and then make the capitulation trade within about 1 or 2 weeks of the wides to take some more pain on the way tighter.

There is some disagreement in the market on what exactly constitutes “Core” and “Core Plus”. My understanding is that “Core” means that you have to exclude EM and HY, but not the securitized stuff. Some managers hold all the spread sectors and still call it “Core”.

virginCFAhooker Wrote: ------------------------------------------------------- > do layoffs usually come at the bottom? before the > bottom? after the bottom? Way before the bottom.

layoffs are like sharebuyback’s :)…its all about improving the EPS number Wonder if, in the years to follow, layoff’s will be part of management’s forward looking statements:)…

Sid, that’s what I was thinking but that’s a contradiction to what busy_people said. Maybe busy_people is more right in this instance since Jpm is a people biz, not an asset biz.

Laying off people (for example) in this quarter will have an effect of increasing the EPS on the next quarter, all else equal-given the lag in payment of severance, etc. Share buyback will have an increasing EPS effect in the very same quarter. Not sure what you mean by JPM being a people biz and not an asset biz. The cost of cutting people will have a significant impact.

virginCFAhooker Wrote: ------------------------------------------------------- > Wow!? How do you blow it by that much with fixed > income!?! Three words: LONG DURATION FINANCIALS

06/19 [Today] is the list