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Some industry insiders have the following rumors to report. Some of this may not be news to you and none of this can be verified, but we thought we would at least give everyone a heads up so if you are in one of these divisions you can take the proper steps to prepare for some (potentially) grim news.

  • * On December 8th, Deutsche Bank may announce further layoffs in Capital Mkts / S&T in the New York office.
  • * HSBC is planning on having layoffs to IBD and S&T in London before year end
  • * The CFO at Merrill supposedly isn't too happy about BoA's future plans for the IBD and S&T divisions of the firm. Reportedly, Bank of America wants very little to do with Merrill's investment banking and S&T divisions and instead plans to focus on Merrill's Asset Managemnt business. What this means for the future of IBD and S&T at Merrill and the timing of it all?...your guess is as good as mine.

Good luck out there,
Patrick

ps - if you have conflicting information please share it. like I mentioned above, none of these rumors can be verified.

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Comments (48)

  • big unit's picture

    I don't understand what BOA is trying to do here...haven't Merrill's S&T and IB been very profitable? Are they just going to absorb certain groups? Ugh...Merrill...ouch

  • IBchimp's picture

    This is disturbing to hear about Merrill's IBD. I would have thought BOA might replace their own bankers with a bunch of Merrill's bankers. I mean, last time I check Merrill's IBD > BOA's IBD. Sad times.

  • In reply to big unit
    WallStreetOasis.com's picture

    big unit:
    I don't understand what BOA is trying to do here...haven't Merrill's S&T and IB been very profitable? Are they just going to absorb certain groups? Ugh...Merrill...ouch

    yeah, take this with a grain of salt -- my source is here at Wharton and has been talking with some mid to upper-level execs at these firms.

    He wasn't sure what BoA was actually going to do with IBD and S&T. I had the same reaction -- well what the hell are they going to do with these divisions if they don't support them?

    I don't see them shutting everything down but maybe scaling them back slowly...who knows, I think anything goes in this market.

  • opticalcharge's picture

    I did my analyst gig at ML a while back. Great set of folks and it's sad to even contemplate they'd disband the IBD/S&T. A lot of good (and painful) memories there.

  • Devils Advocate's picture

    Makes no sense to me why BofA would not be interested in Merrill's S&T and IBD operations. The talent is there, and Merrill has an exceptional reputation in this field.

    Sure, deal flow is down and prop risk taking will be reduced but the recession will eventually end.

    Why in the hell would Lewis pay so much for Merrill only to discard 2 jewels? Then again, the man has a reputation of overpaying...

  • Cornelius's picture

    Good luck to everyone. One way or another, we'll all make it out of this.

    ------------
    We're about to enter a Great Depression.
    Don't you want a president who's already dressed for it?

    ------------
    I'm making it up as I go along.

  • aloki's picture

    The author says that the cuts should be coming before the end of the year. How then, are the majority going to be from Merrill? Are they going to make Merrill lay off a large portion of their workforce?

    Edit: Yes, I realize that they can lay off countless Merrill bankers/traders after the merger, but it's not supposed to close for another few months. I guess we'll hear some sort of announcement within the next few weeks...

  • onebuck's picture

    CNBC now reporting as many as 30,000 employees may be cut (heavily on the ML side)

    To me that almost makes no sense... didn't BOA's Ken Lewis snag ML b/c of their investment banking business that BOA didn't quite have?

  • indian-banker's picture

    they didn't snag ML b/c of the banking business but because of their brokerage business.

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  • youngmoney's picture

    BofA is making a mistake if they lay off all the ML people, and eventually they'll realize that. BofA had a tremendous opportunity to become a preeminent player on the Street with the ML acquisition, but now they're throwing that out the window. Still, if BofA decides to get rid of the ML S&T and IBD divisions, they'll be great assets to some other company and BofA will go back to being a second tier financial services company.

  • lightsout's picture

    Yep, a second tier financial services company that just so happened to make it through this crisis in a position to buy a phenomenal, top notch company that was forced to sell itself for a fraction of its worth after it almost ran itself into bankruptcy. Just because a company isnt strong in IBD and S&T doesnt mean they arent a strong financial services company. Is Wells Fargo second tier too?

    Why is so hard to understand that Lewis bought ML for its brokerage force, not its IBD and S&T. He clearly is looking for stable revenues which retail banking and wealth management bring. He is not the type of guy who would make $20B one year to lose $25B the next.

    Obviously Merrill has a lot of talent, but Lewis has the luxury of being choosy and that is what he is doing - taking the most stable, consistent business lines and employees and getting rid of the rest. I think alot of people are missing the point that Ken Lewis doesnt want BofA to be Wall Street. That is not their business model. I would be surprised if he only laid of 10,000.

  • xqtrack's picture

    right but if he doesnt want anything to do with S&T/IBD why wouldn't he try to sell those businesses to somebody who'd want them? Merrill's IBD is def worth >0 if theyre not going to be taking the top talent and just wholesale firing everybody...

  • WxOnWallStreet's picture

    Who would be looking to to pick up an entire S&T/IB division right now let alone a major expansion of an existing unit.

  • aloki's picture

    I would argue that banking has relatively stable cash flows, granted that the firm doesn't take on risky bought deals. Besides the fact that deals are still getting done in the market (which I know is an important issue), why have boutiques and MM firms largely gone unscathed throughout the crisis? They've stuck to their underwriting and advisory fees instead of trying to make profits by holding issues.

    With better risk oversight, what happened recently should NOT be an issue.

  • indian-banker's picture

    Even in Merrill, who's the real talent? Not the analysts or associates. The guys that make the big bucks are the MDs and those are very few. Lewis probably will keep all the MDs and their VPs and assign them new teams or merge them with existing teams. The bulk of the people that will be fired in S&T/IBD will most likely be analysts or associates and these are candidates that are pretty much the same everywhere. It's not like an analyst at Merrill knows how to hedge something better than an analyst at BOA. Sure an analyst at Merrill may be smarter than one at BOA, but who's looking for smart? It's all about value-add and in the case of analysts and associates it's pretty much the same everywhere.

  • In reply to aloki
    RE_Banker's picture

    aloki:
    I would argue that banking has relatively stable cash flows, granted that the firm doesn't take on risky bought deals. Besides the fact that deals are still getting done in the market (which I know is an important issue), why have boutiques and MM firms largely gone unscathed throughout the crisis? They've stuck to their underwriting and advisory fees instead of trying to make profits by holding issues.

    With better risk oversight, what happened recently should NOT be an issue.

    This is entirely false. Banking does not have stable cashflows and boutiques are not unscathed throughout the crisis. To generate fees, deals have to get done and right now they are not. You also have to consider the fee structure for a lot of deals (M&A is usually around 75 bps of transaction size while capital raising is >300bps of capital raised. So M&A is not uber profitable compared to raising capital unless the m or a is $10+ Billion. You need volume when you are doing smaller deals for it to be profitable. No $10+ billion deals are getting done and capital raises are scarce because investors are waiting out the storm.

    You will start to see boutiques laying off people because they will start to run into cashflow issues. I am hardpressed to believe that Managing Parnters will write checks from their personal accounts to pay the salaries of people who are not really doing any work.

    The rollercoaster ride of cash flows for boutiques is the reason many of them have private equity arms to smooth out the cashflows by collecting asset management fees.

    Sorry for the reality check.

  • aloki's picture

    I learned something today. Thanks for correcting me.

  • In reply to RE_Banker
    indian-banker's picture

    RE_Banker:
    aloki:
    I would argue that banking has relatively stable cash flows, granted that the firm doesn't take on risky bought deals. Besides the fact that deals are still getting done in the market (which I know is an important issue), why have boutiques and MM firms largely gone unscathed throughout the crisis? They've stuck to their underwriting and advisory fees instead of trying to make profits by holding issues.

    With better risk oversight, what happened recently should NOT be an issue.

    This is entirely false. Banking does not have stable cashflows and boutiques are not unscathed throughout the crisis. To generate fees, deals have to get done and right now they are not. You also have to consider the fee structure for a lot of deals (M&A is usually around 75 bps of transaction size while capital raising is >300bps of capital raised. So M&A is not uber profitable compared to raising capital unless the m or a is $10+ Billion. You need volume when you are doing smaller deals for it to be profitable. No $10+ billion deals are getting done and capital raises are scarce because investors are waiting out the storm.

    You will start to see boutiques laying off people because they will start to run into cashflow issues. I am hardpressed to believe that Managing Parnters will write checks from their personal accounts to pay the salaries of people who are not really doing any work.

    The rollercoaster ride of cash flows for boutiques is the reason many of them have private equity arms to smooth out the cashflows by collecting asset management fees.

    Sorry for the reality check.

    I think that depends on the type of capital raising. In DCM, an investment grade issue would charge only 60-70bps once again depending on deal size and that is usually shared by 3-4 banks which are syndicated and the lead book runner getting a little more. In private placements, yes, you can see fees up to 400-500 bps being charged. This is at least what the fees were like on the deals I worked. The fees are much higher for high yield issues. Most of the money is made on the back of the trade like currency swaps or interest rate swaps.

  • lightsout's picture

    Don't forget that M&A activity tends to go hand in hand with M&A financing. I believe Goldman was number one last year in M&A deals as well as financing. They hedged their mortgage book well but took substantial writedowns on their leveraged loan positions.

  • pacio's picture

    DB is going to close its Zurich derivs business - 30 people...have you heard any other layoff in Switzerland for DB ?

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  • In reply to RE_Banker
    zip's picture

    boutiques + cash flow issues = layoffs....it has been going on at my middle-market bank now for a few months. two rounds already...still here and working twice as much after picking up other peoples deals. for how much longer....only time will tell.

  • big unit's picture

    I guess given the above replies, BOA will probably have the option of hiring top ML MD's.

    Like I said, 1st year analysts ('09) will be the same quality as ML's 1st year analysts. This is because since barely anybody is hiring, BOA had the choice of the absolute top analysts who didn't have stable offers. Kids who would have gone to Lehman, Merrill, or even MS and GS simply couldn't win the numbers game, and BOA probably got a few analysts who would have gone to those places a year or two ago.

  • sfrc1's picture

    HOW DO YOU COME TO THE CONCLUSION THAT AN ANALYST AT MERRILL IS SURELY SMARTER THAN ONE AT BOFA !?!!?! I'M TALKING TO YOU CURRY BANKER

  • In reply to sfrc1
    Vol Inversion's picture

    LOL, before this crisis, a smart analyst with both offers from ML and BoA would have picked ML. Only those who couldn't get an offer from ML would have taken one from BoA. dr3am0ne, did you get an offer from ML?

  • In reply to sfrc1
    indian-banker's picture

    dr3am0ne:
    HOW DO YOU COME TO THE CONCLUSION THAT AN ANALYST AT MERRILL IS SURELY SMARTER THAN ONE AT BOFA !?!!?! I'M TALKING TO YOU CURRY BANKER

    Actually I take that smart comment back. You are right, it's very difficult to judge intelligence just by the choice of the bank.

  • In reply to sfrc1
    aloki's picture

    dr3am0ne:
    HOW DO YOU COME TO THE CONCLUSION THAT AN ANALYST AT MERRILL IS SURELY SMARTER THAN ONE AT BOFA !?!!?! I'M TALKING TO YOU CURRY BANKER

    Just like how I know that an Ivy Leaguer is probably (probably is the operating word; I realize that there are exceptions) smarter than a state school kid.

    The kids that went to B of A were the ones that couldn't get Lazard, Evercore, Moelis, GS, MS, ML, LEH, JPM, C, CS, DB, Barc even... they're probably not as capable as the ML kids.

  • In reply to aloki
    sfrc1's picture

    thank you. i apologize for the racial comment.

    For the rest of you smartasses, it is clear that I work at BofA and we're being called out here. IMO you guys forget that prestige is out the window. They will keep the guys that make money. intelligence is irrelevant (as i don't have a whole lot). its as simple as that.

  • aloki's picture

    The problem is, at the analyst and associate level, you can't exactly be a big moneymaker. Some are arguing that ML and B of A analysts/associates are interchangeable, but I disagree. I don't think there's a huge difference, as getting into an investment bank--especially given the current environment--is a difficult task. However, I think that a difference definitely exists... Now we're all worried about losing our jobs despite getting into what was once one of the best firms on Wall Street.

    I worked hard to get where I am today and don't want to lose it because of something beyond my control.

    As you can guess, I'm in the incoming ML '09 class. Scared doesn't begin to explain how I feel.

  • Devils Advocate's picture

    Some of you all are delusional.

    BofA/ML SAs ARE interchangeable; all analysts need to know is addition, multiplication, subtraction and division for this job.

    Sure, some firms are more difficult to get into than others, but honestly how much does the work vary once you get in? What exactly makes one more capable than the other?

    Sorry but the level of intelligence required is minimum, and whatever difference you think exists is either nonexistent or immaterial.

  • HerSerendipity's picture

    It's not intelligence, it's work product. We can all agree that it does not take a great amount of mental capacity to do banking. In my limited time at a PE shop (now on the 'other' side of the table), I've definitely notice the differences in work produced by the various banks. Maybe it's the different formats used or something to an extent, but even with the junior guys (associates and analysts), there is a distinct difference. From some of my good friends at BarcLehs (of Lehman vintage), apparently the people on the junior level produce a very different level of pure work. Forget about doing anything that requires intelligence. I'm talking about straight organizational skills, power point formatting, ability to grasp concepts, etc.

    It is the same way one would expect someone from an Ivy League or Ivy-League caliber school to be more polished (overall) than a state school kid just by sheer externalities, exposure to peers, etc. Obviously, there are always exceptions in either direction.

  • Devils Advocate's picture

    However,

    HerSerendipity I agree with that statement; however, my comment refers mainly to the incoming class.

    The difference in work product can probably be attributed to the time spent in that particular banking culture, hence the different in the quality of analyst work.

    However, I don't see how that logic can be applied to individuals of separate SA classes that are about to become one as I doubt they have spent enough time immersed in the profession to really develop a particular caliber, hence my comment about there being no difference between ML and BofA.

  • big unit's picture

    Like I said earlier thread, I could have been a decent IB 1st year in 9th grade.

    If, for example, BOA 1st years averaged a 1400 on their SAT and ML 1st years averaged 1450 on their SAT, do you really think the 50 points make a real difference in performance?

    Maybe in certain fields, but on in finance.

    All in, I'm willing to argue that '09 grads who signed with BOA are much stronger than the '08 or '07 grads who signed with BOA given there were less opportunities for top students.

    Thats why its not entirely surprising BOA might crack down on ML's analysts and associates (though it doesn't really make that much sense to me...I'm just trying to find some rationalization for it...).

  • aloki's picture

    At the analyst level, banking is, as HerSerendipity said, about organizational skills, attention to detail, ability to manage multiple projects, etc. Not to be arrogant, but I've carried a part-time job, held active roles in multiple organizations on campus and am graduating an entire year early (with no AP credits). Yes, I think I'm better than the kids going to B of A... at least from my school. I haven't been impressed by any of them. I would say differently about the other ML summers from my school.

    You have to realize that the majority of the incoming B of A analyst class was hired last January. Back then, it was still a last resort. I didn't even choose to apply there. I don't think that every B of A analyst is like the ones I've met, but honestly I think on average the ML kids were better.

    Maybe I'm just biased and being a dick because my job is on the line here and I'm trying to rationalize why I shouldn't be fired.

  • HerSerendipity's picture

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