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Lehman CEO Fuld Faces Growing Pressure to Sell
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On-Air Editor
As discontent grows inside Lehman Brothers over the firm's financial problems, pressure is building on Chief Executive Dick Fuld to sell the securities firm to a bigger player, CNBC has learned.
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CNBC.com |
Inside Lehman [LEH
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], executives are conceding that unless business conditions radically improve -- and all signs point to the opposite -- or the firm is sold to a larger player, Lehman may have make large cuts to its workforce of 26,189.
Already fear is spreading through the senior ranks of the investment bank: Worried bankers and traders have recently been making frantic calls to better capitalized banks, like Credit Suisse and others in hopes of landing jobs before the cuts come.
People on Wall Street say Fuld is already weighing a possible sale. Possible bidders include HSBC [HBC
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], Barclays [BCS
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] and Toronto Dominion [TD
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]. CNBC has reported that private equity firm Blackstone was weighing a large stake in Lehman.
A spokesman for Lehman had no comment.
A senior executive at Lehman said CEO Richard Fuld has no concrete plan for any cuts at least for the moment.
Still people inside the firm say the future looks dim. So far this year, Lehman has cut its workforce by around 10%. But the additional layoffs could be much larger given the scope of the problems faced by Lehman--as high as 20%, Wall Street executives estimate, unless a deal is done or business begins to improve.
Lehman just announced a second quarter loss of around $3 billion because of bad loans on its books, and the firm has left open the possibility of further losses in the future. "Just do the math," said one senior executive of a Wall Street firm that owns Lehman stock. "There's no way you can make the numbers work unless you bring down headcount big time, or sell the firm."
The problem for Lehman is even more pronounced than at other players on Wall Street like JPMorgan Chase [JPM
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], which as CNBC first reported, is also leaving open the possibility of further job cuts. Lehman's balance sheet issues are more severe than well capitalized banks like JPMorgan. While profit margins are being squeezed across Wall Street because firms are cutting back on risky, but profitable, trades, Lehman is taking less risk than the others because of the recent writedowns. That means its profit margins could fall further.
For the past decade, CEO Fuld has consistently fought to keep Lehman independent even in the face of past adversity, and in the process built one of the most successful and profitable Wall Street firms before his recent problems.
But the problems facing the firm now are more pronounced and many Wall Street executives believe Fuld will have no choice but to sell. In announcing the firm's massive second quarter loss, Fuld conceded that selling the firm may be the only alternative
A Lehman spokesman had no immediate comment.
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