U.S.

Merrill Lynch Weighs Deep Cuts

By CBSNews.com staff CBSNews.com staff

October 17, 2001 / 9:48 AM EDT / CBS MarketWatch

Merrill Lynch, the nation's largest brokerage, is considering a restructuring that may result in cutting up to 15 percent of its employees and taking a $1 billion fourth-quarter charge, a published report said Wednesday.

The report in The Wall Street Journal said the securities giant is preparing for a retrenchment, including the loss of 10,000 jobs, as Merrill considers retreating from some prominent business lines because of the sour business climate.

A Merrill spokesman in London on Wednesday declined to comment directly on the report. However, a statement from the broker said that a review of the firm's businesses is under way with a view to cut costs.

"Throughout this year in a deteriorating environment, we've been engaged in a review of all our businesses to make sure they're sized properly for the market opportunity. While the pace of this review is accelerating, decisions will be made business by business and we have no overall, company-wide headcount reduction targets."

According to the Journal report, under the direction of recently appointed President E. Stanley O'Neal, top Merrill executives have launched a major review of the company's operations to determine if it should continue or significantly downsize in such countries as Japan, Canada, Australia and India.

The report said that while the review is still in its early stages, it would likely result in paring down the company's operations.

Compensation spending typically make up two-thirds of costs for securities firms.

Third-quarter financial results for the leading investment banks and brokerages are doing little to ease concerns buffeting Wall Street, industry analysts say. Trading revenues are down as a result of factors ranging from the impact of lower retail investments to the conversion to quoting stocks in decimals.

"The brutal downturn, exacerbated by the Sept. 11 tragedy, has fuelled speculation on issues ranging from major layoffs to further consolidation," said Diane Glossman, financial services analyst at UBS Warburg.

Merrill Lynch, the largest employer among the Wall Street broker-dealers, saw its work force grow to a peak 72,000 in 2000, up from 60,500 in 1997. UBS Warburg is predicting that the headcount declined to 67,000 by the end of the third quarter this year.