Wall St. cuts perks with writedowns, layoffs
NEW YORK (Reuters) - For many bankers and traders, the days of company perks such as sleek limos, cushy business class seats, and fat steaks are gone.
Multibillion dollar write-downs have forced trading desk heads and senior bankers to chip away at small comforts to reduce expenses and strengthen the bottom line.
Just ask Ron Karp, a controller at Corporate Transportation Group, which provides rides home to Wall Streeters working late.
"The phone doesn't ring as much as it used to. If you're firing people you're not going to send them around in limos," Karp said. The slowdown has been visible over the past month at car services city-wide, he added.
Cutbacks are happening in individual departments, rather than companywide as seen early this decade after the tech bubble burst.
But affected employees feel the pinch anyway. Credit Suisse has reduced some cell phone subsidies and done away with car vouchers. Merrill Lynch has banned business class travel for some divisions, Goldman Sachs has pulled free soda, and JPMorgan has upped the requirements for free meals and car rides.
Slashing small perks cuts costs, but more importantly it signals that workers should keep expenses down in areas under their control. "Banks cut perks to reinforce to employees that the firm's under pressure," Brad Hintz, an equity analyst at Sanford C. Bernstein, said. "It tells people to use their heads and watch expenses."
A HARSH CLIMATE
Financial institutions have announced more than $300 billion of write-downs, losses and credit provisions since mid-2007.
That has spurred big layoffs, including over 23,000 announced in April, with about half the cuts coming out of Merrill Lynch and Citigroup, according to a report by Challenger, Gray & Christmas, Inc.
"The usual pattern is to accelerate layoffs and cut operating costs as much as they can," said Roy Smith, a professor of entrepreneurship and finance at the Stern School of Business and a former partner at Goldman Sachs. Banks followed this protocol in 1987, 1990-91, 1994, 1998 and 2000-2002, he said.
The question remains whether the cuts will end as the outlook for Wall Street firms improves, with the AMEX Security Broker Dealer Index .XBD rising over 30 percent to 181 since its March 17 lows.
TIGHTENING THE BELT
Managers forced to make a choice prefer to cut comforts rather than personnel so that they are equipped to take advantage of any rebound in the markets.
Hence, at Credit Suisse (CSGN.VX), some divisions have placed a strict $30 limit on meals ordered by traders working late, according to a person familiar with the matter. Employees can no longer choose dinner from any restaurant in town. Instead, all catering goes through online service SeamlessWeb, so that managers can better monitor food orders. Continued...
