Investment banks unleashed round after round of job cuts in the asset securitization industry last week, and sources say they are bracing for even more layoffs in the coming weeks.
Top fixed-income executives at Merrill Lynch took the latest hit. The bank ousted Osman Semerci, head of the bank's fixed-income division, and Dale Lattanzio, co-head of its fixed-income and structured credit products business, after Merrill experienced losses in the credit markets, according to industry sources and media reports. David Sobotka, who has run Merrill Lynch's global commodities business since 2004, will replace Semerci.
Earlier in the week, Bear Stearns announced 310 layoffs, most of which stemmed from the bank's MBS businesses and involved servicing professionals, according to one market source. The bank said it expected mortgage-related losses to hang on for another 18 months. Aside from that, Bear said it would cut another 170 jobs (in addition to the 150 cuts it announced last week) from its investment banking units, which would affect professionals in its New York and London offices. The cuts underscored the extent of trauma now working its way through the mortgage-lending, servicing and securitization businesses at many investment banks.
During the week, Morgan Stanley also said it would cut 600 jobs in the U.S. and Europe as it begins the process of restructuring its residential lending business. The company said it would consolidate its three stand-alone U.S. mortgage businesses based in Irving, Texas. Those companies are Saxon Capital, a servicer and wholesale originator; Morgan Stanley Credit Corp., a wholesale originator of prime loans; and Morgan Stanley Mortgage Capital Holdings, which aggregates loans purchased from correspondent lenders. Its U.K.-based mortgage subsidiary, Advantage, is also slated to lose about 90 jobs.
There were no well-known MBS casualties from that move, but market sources say they do not expect the job cuts to end soon.
Market sources expected layoffs from UBS as well. After announcing that it would write off SFr 4 billion ($3.4 billion) in losses from its fixed-income portfolio and other business lines, UBS confirmed those fears by cutting 70 jobs from its structured finance group on Monday, according to market sources. The job losses were part of an overall reduction of 1,500 jobs from its fixed-income business.
"After assessing the current market outlook and our business needs, we have decided to resize our mortgage-backed, asset-backed and CDO businesses in the U.S. to be more competitive in a changing environment," said Douglas Morris, a company spokesman.
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