Bankers Trust New York Corp. is hardly the only financial institution compelled to cut staff because of a slowing trading business - just one of the most recent and visible.
Last week, before the bank had announced it expects a $125 million after-tax loss in the first quarter - attributable mainly to derivatives and Latin American exposure - it said it would make a 5% cutback in its global investment banking unit, mainly in the derivatives area. Other accounts have said a 10% bankwide staff cut is in store.
For Bankers Trust, the disclosures cap a tumultuous year that saw its derivatives unit hit with high-profile lawsuits by the likes of Procter & Gamble Co.
Analysts said, however, that the cutbacks reflect a widespread trend in the cyclical trading business - the same trend that last week compelled S.G. Warburg PLC to announce a cut of 90 equity derivatives traders, 27% of its trading staff.
Declining revenues have forced other banks with trading businesses, such as J.P. Morgan & Co., Chemical Banking Corp., and Chase Manhattan Corp., to look for cuts as well.
"We've seen layoffs throughout investment banking," said Lawrence W. Cohn, a bank equity analyst at PaineWebber Inc. "We view Bankers Trust's announcement as a catch-up along those lines. It's not in any fashion different from what we're hearing at other banks."
Revenues and profit margins from derivatives have decreased because of corporate America's flight to the lower-profit, plain vanilla derivatives, which require smaller support staffs.
"These layoffs reflect a real assessment that business may be down for a long time," said Ann Robinson, a fixed-income analyst at Bear, Stearns & Co. "This is a confirmation of the serious nature of the revenue squeeze."
A recent survey by the Economist Intelligence Unit of 100 corporate executives suggested that an overwhelming majority of managers prefer plain vanilla products.
The survey was conducted before the trading-generated failure of Barings PLC.
"Barings probably put some more fear into the customer base," said Ms. Robinson. High-profile problems such as those at Barings may encourage financial executives to look over their controls.
Concern about the complexity and volatility of trading businesses like derivatives has given banks considering a shift in their business - to take advantage of an expected lifting of restrictions of their securities powers - cause to pause.
"Banks are absolutely taking notice," said Mr. Cohn. "There are a lot of banks that may have initially had more aggressive plans that are looking at the cyclicality of the business." The true returns from investment banking are not nearly as high as the returns of the last few years, he said.
"We don't lay people off like that," said David T. Gardner, a vice president and director of investor relations at Synovus Financial Corp. "We look around us at all these carcasses and say, 'Do we want to do that?"'
The Columbus, Ga.-based bank has been in the securities business since 1985, and plans a deliberate pace as it proceeds further into this volatile business.
Some executive search firms say the trend towards cost cutting has caused some serious dislocation.
"We're getting more unsolicited resumes than I've ever seen in our 10 years in the business," said Phillip B. Plank, president of the New York- based executive search firm Hudson Search Consultants.
Market sources pointed to First Union Corp. as one of those hiring in the derivatives community. Since 1993, the North Carolina bank has hired approximately 30 Wall Street traders for its derivatives business.
The derivatives market has responded to the openings, sending resumes at a rapid clip. "We're getting about six to eight additional resumes a week," said Terry Turner, the managing director of First Union's derivatives operations in Charlotte.
The bank has hired most of the experienced workers it needs, however, and is primarily looking for about six to eight undergraduates and recent MBAs to serve as support staff.
While some search firms say the job market for traders is tight, others think there are some strong opportunities for derivatives professionals, particularly with foreign banks.
The Canadian Imperial Bank of Commerce has hired approximately 100 people for its derivatives business since last June.
It is currently looking for an additional 25 to 40 professionals to join its expanding staff.
A bank official reportedly expressed delight that the bank was in a position to look at the best people in the marketplace.
T. Lee Pomeroy, a consultant at the executive search firm Egon Zehnder International, said that foreign banks are currently offering the largest number of opportunities for derivatives professionals.
Foreign banks are looking to start up in the derivatives business, and as such are behind the American banks in staffing their offices, Mr. Pomeroy said.
Even as consolidation continues to cause dislocation among the largest traders, Mr. Pomeroy said, there are and will continue to be increasing opportunities at domestic and foreign banks that are starting up their own businesses.
"There is a strong groundswell for more of these (traders) beyond the top 10 financial institutions in this business," said Mr. Pomeroy. "There will be a great opportunity in the next 20 or 30 players, particularly among foreign banks.''
The largest banks with the longest-established trading businesses, however, will continue to reflect the sector's volatility.
