Financial Job Losses May Double to 350,000 by 2009

By Philip Lagerkranser

Nov. 21 (Bloomberg) -- The bloodletting in the financial- services industry will accelerate in coming months, with job cuts doubling to about 350,000 worldwide by mid-2009, said Brian Sullivan, chief executive officer of search firm CTPartners.

Reductions on that scale would be equivalent to 20 percent of the global workforce at financial companies before the credit crisis began, said Sullivan, whose firm has worked with Citigroup Inc. and JPMorgan Chase & Co.. Banks, brokerages and funds have eliminated about 170,000 positions worldwide.

``This is the financial equivalent of World War II,'' Sullivan said in an interview in Hong Kong. ``It's unprecedented. You're seeing a seismic shift in the population of banking.''

Banks are racing to cut jobs from New York to Sydney as frozen credit markets cause revenues to tumble and the financial industry tries to digest almost $1 trillion of writedowns and losses. The worst financial crisis since the Great Depression will reshape the investment banking industry, as firms lose the ability to use leverage to boost returns, Sullivan said.

``Without the massive leverage that's been in the system, the business of some of these big investment banks simply isn't going to be there,'' he said. ``You'll go back to the investment banks of the 1960s and '70s.''

CTPartners is shifting headhunters from banking to industries such as pharmaceuticals and clean energy as demand for finance professionals dries up, he said. The company is the world's sixth-largest executive search firm, Sullivan said.

Reduced Risk-Taking

Following the collapse of Lehman Brothers Holdings Inc., Goldman Sachs Group Inc. and Morgan Stanley have converted themselves into bank holding companies regulated by the Federal Reserve. As such, their ability to take risks will be curbed, lowering profitability, Sullivan said.

Citigroup will cut 52,000 jobs in the next year after losing almost $20 billion in the past four quarters, Chief Executive Officer Vikram Pandit said this week. The bank's board meets today to discuss options after the stock fell 26 percent in New York trading yesterday to a 15-year low, a person familiar with the matter said.

Stripped of their ability to use balance sheets for making big trading bets, investment banks will retrench to their traditional role of advising on acquisitions, providing research and underwriting stock and bond sales, said Sullivan.

That may spell bad news for the mathematical engineers -- so-called ``quants'' -- who concoct exotic derivatives products or devise computer-driven trading strategies. They were among the most sought-after professionals before the credit freeze.

``The classic investment bankers, advisers, are still going to be in demand,'' he said. ``The people who are going to be in less demand are the highly quantitative, mathematically oriented product development people.''

To contact the reporters for this story: Philip Lagerkranser in Hong Kong at lagerkranser@bloomberg.net