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JPMorgan Cuts Jobs In Investment Banking

Reuters
Thursday, 11 Oct 2007 | 3:42 PM ET

JPMorgan Chase said on Thursday it was cutting an unspecified number of jobs across its fixed-income division as investors brace for a multibillion-dollar write-down next week on the bank's leveraged loans and other assets.

Oliver Quillia for cnbc.com

The No. 3 U.S. bank said the job cuts include structured credit and leveraged finance positions.

"We are making modest staff reductions in areas where we expect lower volumes going forward, including leveraged finance and structured credit," JPMorgan spokesman Brian Marchiony said.

The cuts are expected to be less than 10 percent in the affected areas, according to people familiar with the situation. And no senior executives are expected to lose their jobs, unlike what has happened at rival banks such as Bear Stearns and Merrill Lynch.

Job losses in the leveraged finance group, among the first announced on Wall Street, indicate casualties from the credit crunch and the pullback in private equity deals.

Leveraged finance groups arrange the debt packages attached to private equity deals. Frothy debt markets and low interest rates fed a two-year private equity deal boom, where buyout firms took part in more than $1 trillion worth of deals.

The buyout boom kept leveraged finance desks busy. But the credit crunch that hit this summer spooked debt investors and left banks with more than $350 billion in loans stuck on their balance sheets.

That sparked a severe slowdown in private equity dealmaking, leaving leveraged finance desks with few deals to arrange or syndicate.

Earlier this month, Deutsche Bank analyst Mike Mayo predicted JPMorgan should have about $2 billion in leveraged loan write-downs before fees and hedges.

JPMorgan is expected to post lower profit when it releases third-quarter results Oct. 17 as the global credit squeeze disrupts fixed-income trading. This summer, two hedge funds run by Bear Stearns collapsed, tarnishing the investment bank's image while leading to the ouster of co-president Warren Spector.

Merrill Lynch shocked investors last week when it said it would write-down $5.5 billion in assets in the third quarter and report a loss. Merrill also ousted Osman Semerci, global head of fixed income, currencies and commodities.

JPMorgan reported having 179,664 total employees in July.

About 25,400 jobs are in the investment banking division, which includes fixed-income operations.

JPMorgan shares are down 3 percent this year.

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