JPMorgan Chase & Co. (JPM) and Bank of America Corp., the two biggest U.S. banks, are cutting senior mortgage traders and salesmen amid a decline in the asset-backed securities market, people with knowledge of the moves said.
Raphael Gonzalez, JPMorgan's co-head of trading in subprime mortgages, and John Angelica, a securitized-products salesman, resigned from the New York-based bank within the past four weeks in exchange for severance packages that included all of their deferred stock awards, said the people, who declined to be identified because the terms are private. Roy Kim, who traded adjustable-rate mortgages, left on his own accord with a similar exit deal, the people said.
JPMorgan and Bank of America, based in Charlotte, North Carolina, are re-evaluating staffing on mortgage-trading desks amid pressure to cut expenses and stricter capital requirements tied to the assets. Some employees were offered severance packages allowing them to keep millions of dollars of deferred stock that otherwise may have been forfeited, the people said.
"When you start doing something like this, you're making a forward statement about the mortgage-backed security market — they are saying it isn't going to be as active," said Brad Hintz, an analyst covering banks at Sanford C. Bernstein & Co. in New York. "Firms are right-sizing for the fixed-income market of the future. We'll probably be seeing this in a lot of other Wall Street businesses as the regulations become clear."
Trading in securitized products at the 10 biggest global investment banks dropped to roughly $10 billion last year from about $17.5 billion in 2010, according to data from consultant Coalition Ltd.
The three JPMorgan executives left amid involuntary reductions in the past four weeks in the bank's securitized- products division, which trades and sells mortgage bonds, derivatives and other asset-backed securities, according to two of the people with knowledge of the matter. Jennifer Zuccarelli, a JPMorgan spokeswoman, said she couldn't comment on the departures, as did Gonzalez and Angelica. Contact information for Kim couldn't immediately be located.
The bank also dismissed about 5 percent of its equities traders and salesmen in New York yesterday and cut about 100 employees in its treasury and securities services division in January, according to three different people with knowledge of those moves.
Bank of America eliminated at least half a dozen traders and salesmen in its mortgage unit this week. John McNiff, a managing director who served as co-head of commercial mortgage securities trading, resigned, said people with knowledge of the moves.
Managing directors Seth Jackier in mortgage sales and John Eck in asset-backed trading also opted to leave Bank of America, said the people. Michael Case, a director in commercial mortgage security banking, and salesmen John Livingstone and Michael L. Miller also departed, one of the people said.
"Areas like this that didn't come back as expected are the ones that companies are now evaluating," said Jeanne Branthover, managing director at Boyden Global Executive Search Ltd. in New York. "This isn't necessarily bad news" for people who may have been considering moving to other firms, she said.
Some Bank of America employees volunteered to resign in exchange for a so-called garden leave, a period of about 90 days in which they receive full salary and benefits while staying at home, as well as severance packages, the people said.
The bank also is cutting outside the U.S., dismissing almost a dozen workers at its Canadian capital-markets business as part of a global staff reduction, one person said. The move leaves the bank with almost 500 people at offices in Toronto, Montreal, Vancouver and Calgary, the person said.
Wall Street firms are firing staff and reducing pay as revenue wanes from trading and underwriting. More cuts are coming at Bank of America as part of Chief Executive Officer Brian T. Moynihan's efficiency plan, which may target as much as $8 billion in total annual savings. Moynihan, 52, already announced as many as 30,000 job cuts in retail banking and technology.
Bank of America lost market share last year to rivals including New York-based Morgan Stanley (MS) in the trading of equities, bonds, currencies and commodities, Matthew O'Connor, an analyst at Deutsche Bank AG, said in a Jan. 19 research note.