A cost-cutting plan by HSBC to layoff 1,100 staff in its global investment banking operation will put hundreds of UK IT contractors out of work.
Europe’s biggest bank by market value says 650 employees and 450 temporary workers, including contractors, face redundancy from the division’s business and IT support roles. About 500 jobs will go in the UK where HSBC said it had briefed affected parties of the cuts, which were necessary due to today’s tough “business and economic environments.” A spokesman for HSBC denied claims that certain IT workers, including contractors, in front, middle or back-office roles had been singled out for not adding enough value. “Within the IT contractor redundancies, HSBC has worked closely with the agencies and contractors to manage this as sensitively as possible,” the spokesman told CUK. “Some contractors who were very close to the end of their contract were a starting point and absorbed the focus, rather than those with a long period still ahead of them.” The cuts, which represent 4% of the unit, were described as “sensible steps” to take in response to today’s economic pressures and formed part of HSBC’s “cautious outlook for 2009.”
In August, HSBC global banking and markets reported pre-tax profits down 35% in the first half-year to $2.1bn, a 37% improvement from the second half of 2007. Overall, the bank posted a 28% fall in first-half pre-tax profits to $10.2bn, thanks to a $14bn hit from asset writedowns and bad debts in the US home loan market. For IT contractors, the bank said it would “continually review market rates and practices” to ensure HSBC was “competitive”, without saying if cuts had hit the departing contractors. Some banks, like HSBC rival HBOS, initially cut contractors’ pay at the first sign of financial woes, but evidently failed to yield enough savings and followed up by trimming their numbers. From now until Christmas, financers are expected to shed 12,000 jobs directly as a result of the credit crunch, swelling the number of staff they made jobless on last year by one third. The prediction, from the CBI, adds to the more than 80,000 job cuts across the banking sector in the past 18 months, which continue unabated as the borrowing and lending droughts intensify. This week, Britain’s biggest employers’ group said the ongoing drive to cut costs and a “readjust for lower demand” would see most financers drop their levels of IT investment. Its member survey found trading volumes were at their weakest since 1989 and profitability in financial services fell at a record rate, which was set to last for the next three months. Job losses were set to rise sharply over the next quarter, the group also warned, and 99 per cent of firms said it would take more than six months for “normal” market conditions to return.
Last night, the administrators for Lehman Brothers said a restructuring of the 105-year-old business would see 750 staff, mainly in London, made redundant from today. Tony Lomas, of PricewaterhouseCoopers, said it was “extremely disappointing” that the jobs at the bank’s European operation could not be saved “despite exhausting all avenues”.
* - Article from www.contractoruk.com
Showing posts with label Credit Crunch. Show all posts
Showing posts with label Credit Crunch. Show all posts
Wednesday, October 1, 2008
Wednesday, September 17, 2008
City Jobs
Hiring in the financial services sector in the City has ‘slowed considerably’ during August because of the faltering global economy.
According to the Morgan McKinley London Employment Monitor, the number of new job vacancies in the City fell by 34% in August compared to the same time last year. The number of individuals registering for new jobs also decreased in August, down by 37% compared with August 2007 and the average City salary has dipped slightly by 2%.
Robert Thesiger, chief executive of Morgan McKinley’s parent company, Imprint, said: “Following the collapse of one of the financial services industry’s major institutions at the weekend, it is evident that the fallout from the credit crisis is not over. These momentous events of the past few days have changed the landscape of not only London’s but also the global financial services sector. It is probably fair to say, therefore, that the period of transition that will now follow will create an equally challenging and nervous environment within financial services and the recruitment market within this sector.”
* - Article from the recruiter
Tuesday, September 16, 2008
Letting Lehman Collapse Was Right Move
It’s been an extraordinary weekend on Wall Street and the latest events in the financial crisis will probably affect us all.
Lehman Brothers’ move to Chapter 11 -- roughly equivalent to administration in the UK -- is extraordinary in itself. Lehman is (or was) the fourth largest investment bank in the world after all. But on top of that, you have an emergency takeover of Merrill Lynch and insurance giant AIG in deep trouble, too.
Today’s news makes it even clearer that the days of cheap credit and surging property prices are over. Stability will eventually return but I may not see ‘irrational exuberance’ again in my lifetime.
Today’s markets
Shares in London have fallen across the board this morning and we’ll probably see a similar picture this afternoon on Wall Street. As I write, the FTSE 100 is down 185 points at 5,232 while mortgage bank HBOS (LSE: HBOS) has slumped 52p to 229p.
Other financial fallers include Royal Bank of Scotland (LSE: RBS), down 21p at 212p, and Barclays (LSE: BARC), which has dropped 36p to 314p.
I can understand why investors are selling out. Lehman had big positions in derivatives markets and we don’t know which banks are exposed to those positions. Lehman’s positions will now have to be unwound in very difficult markets and other assets may be sold at ‘fire sale’ prices, too.
There’s a risk of a domino effect across the financial sector as asset values fall further.
Beyond shares
Sadly I fear Lehman’s collapse will even affect those of us without a share portfolio. For starters, the economy will be hit as bankers lose jobs and confidence suffers.
And the mortgage market could be hit as well. In recent weeks we had seen tentative signs of a revival with rate cuts on some mortgages. I reckon we’ll see that trend go into reverse as lenders once again find it harder to raise finance.
On the plus side, central banks such as the Bank of England may start to cut interest rates more quickly than had been expected. Central bankers will know that further bank failures could lead to deflation -- where retail prices fall. The obvious way to avert deflation is to cut interest rates.
What now?
The most important advice I can give is: ‘Don’t Panic!’ We’ll get through this crisis in the end. If you can focus on the long term, now is probably a good time to drip money into the stock market. The good old index-tracker fund will do nicely.
However, I would stress that any stock-market investments should really be for the long term. I mean ten years or longer. Drip feeding your cash in every month is a good approach, as it means you can 'average down' at lower prices if the market falls further.
The one area I’d avoid is bank shares. Sure, they look cheap at first glance -- if you believe analyst forecasts, HBOS is trading on a price/earnings ratio of just 4 for this year.
Trouble is, it’s very hard to ascertain the true health of the loan book and there’s a real risk of further fund raisings in this sector. Possibly even a Lehman-style collapse. I’m steering clear of the lot for now.
Hank got it right
But in spite of all the gloom, I am pleased about one thing. US Treasury Secretary, Hank Paulson, made the right call. We’ve seen government bail-outs of Fannie, Freddie, Bear Stearns, and Northern Rock, but it’s been different for Lehman. Paulson has let Lehman go to the wall.
That was the right decision because bankers had to learn that the government wouldn’t always rescue them when they took on too much risk. If bankers never learned that lesson we’d see another bubble all too soon.
The biggest risk for all of us now is deflation. Let’s hope that central bankers and governments can inject enough cash into the system to stop that happening.
* - Article from Motley Fool
Lehman Brothers’ move to Chapter 11 -- roughly equivalent to administration in the UK -- is extraordinary in itself. Lehman is (or was) the fourth largest investment bank in the world after all. But on top of that, you have an emergency takeover of Merrill Lynch and insurance giant AIG in deep trouble, too.
Today’s news makes it even clearer that the days of cheap credit and surging property prices are over. Stability will eventually return but I may not see ‘irrational exuberance’ again in my lifetime.
Today’s markets
Shares in London have fallen across the board this morning and we’ll probably see a similar picture this afternoon on Wall Street. As I write, the FTSE 100 is down 185 points at 5,232 while mortgage bank HBOS (LSE: HBOS) has slumped 52p to 229p.
Other financial fallers include Royal Bank of Scotland (LSE: RBS), down 21p at 212p, and Barclays (LSE: BARC), which has dropped 36p to 314p.
I can understand why investors are selling out. Lehman had big positions in derivatives markets and we don’t know which banks are exposed to those positions. Lehman’s positions will now have to be unwound in very difficult markets and other assets may be sold at ‘fire sale’ prices, too.
There’s a risk of a domino effect across the financial sector as asset values fall further.
Beyond shares
Sadly I fear Lehman’s collapse will even affect those of us without a share portfolio. For starters, the economy will be hit as bankers lose jobs and confidence suffers.
And the mortgage market could be hit as well. In recent weeks we had seen tentative signs of a revival with rate cuts on some mortgages. I reckon we’ll see that trend go into reverse as lenders once again find it harder to raise finance.
On the plus side, central banks such as the Bank of England may start to cut interest rates more quickly than had been expected. Central bankers will know that further bank failures could lead to deflation -- where retail prices fall. The obvious way to avert deflation is to cut interest rates.
What now?
The most important advice I can give is: ‘Don’t Panic!’ We’ll get through this crisis in the end. If you can focus on the long term, now is probably a good time to drip money into the stock market. The good old index-tracker fund will do nicely.
However, I would stress that any stock-market investments should really be for the long term. I mean ten years or longer. Drip feeding your cash in every month is a good approach, as it means you can 'average down' at lower prices if the market falls further.
The one area I’d avoid is bank shares. Sure, they look cheap at first glance -- if you believe analyst forecasts, HBOS is trading on a price/earnings ratio of just 4 for this year.
Trouble is, it’s very hard to ascertain the true health of the loan book and there’s a real risk of further fund raisings in this sector. Possibly even a Lehman-style collapse. I’m steering clear of the lot for now.
Hank got it right
But in spite of all the gloom, I am pleased about one thing. US Treasury Secretary, Hank Paulson, made the right call. We’ve seen government bail-outs of Fannie, Freddie, Bear Stearns, and Northern Rock, but it’s been different for Lehman. Paulson has let Lehman go to the wall.
That was the right decision because bankers had to learn that the government wouldn’t always rescue them when they took on too much risk. If bankers never learned that lesson we’d see another bubble all too soon.
The biggest risk for all of us now is deflation. Let’s hope that central bankers and governments can inject enough cash into the system to stop that happening.
* - Article from Motley Fool
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