For several months now, the capital markets have been bracing for layoffs stemming from the downturn in the subprime MBS, CDO and broader ABS markets. Last week, a wave of at least a couple hundred layoffs moved through the MBS businesses at Credit Suisse and HSBC Securities, leaving much of the industry nervously awaiting more.
Credit Suisse announced the largest single number of layoffs. Market sources familiar with the situation estimated that about 150 people were cut from its MBS unit, including about 40 from its offices in New York. HSBC Securities lost about 30 professionals from its MBS unit through layoffs and voluntary resignations.
RBC Capital Markets also cut a couple of dozen professionals from its fixed-income unit. According to press reports, the firm targeted about 40 fixed-income sales positions for elimination. The company, however, did not confirm either plan.
"It is a cost-cutting measure," a source familiar with the situation said. "Some of these organizations put a lot of resources into their mortgage businesses. This saves the Street a lot of money, because there are no bonuses [to pay]."
At HSBC Securities, the cuts primarily hit the bank's sales and trading groups and affected personnel at various levels of seniority, from vice presidents in its trading group to senior managing directors. HSBC officials declined comment, but market sources familiar with the situation said that Neal Leonard, a senior managing director who co-headed its MBS business with Todd White, resigned from the firm. Leonard and White joined HSBC in June 2004. White remains at HSBC.
Several executives survived the cuts, according to market sources, including Jeffrey Moses, a managing director and head of its ABS and structured bonds business, as well as Nicholas Letica, who joined in August 2005 and headed CMO trading.
In a statement, RBC Capital Markets acknowledged changes to its operations, which it put down to a strategic response to changing opportunities in the U.S. fixed-income market. It did not, however, refer directly to any job cuts.
"Our fixed income and currency business is not experiencing a significant change in business performance, and we attribute this to a high degree of diversification across our sales and trading businesses," the company said. It added that it remained committed to building a top fixed-income business globally, with a significant presence in the U.S. market.
"Everywhere on Wall Street, people are nervous about their jobs," a market source said. "Surely these people with a tremendous amount of experience will hook up with other institutions, or basically wait around for the first and second quarters next year."
(c) 2007 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.