JP Morgan Chase & Co. will fire about 20% of the 20,000 employees in its investment banking unit, as it struggles with the ongoing slowdown in the capital markets and a huge drop in its trading revenues.
The job cuts would effectively eliminate one-fifth, or 4,000 jobs, in Morgan Chase’s investment banking unit, a market source said Sunday. A spokesman for JP Morgan Chase declined to comment.
The layoffs target the combined part of the former JP Morgan & Co. and Chase Manhattan Corp, the two companies that merged to form Morgan Chase in Dec. 2000, and signal the growing pressure for management to show positive results from the deal.
Market conditions and the economy, however, have not cooperated.
Last month, William B. Harrison Jr., Morgan Chase’s chairman and chief executive officer, warned investors that the company’s third quarter earnings would be “well below” the 58 cents a share the New York-based company reported for the second quarter because of soured telecommunications loans and sharply lower trading revenues.
For July and August, trading revenues in the investment bank reached just $100 million, compared to $1.1 billion for the entire second quarter. When reporting its second quarter results, Morgan Chase had blamed its poor earnings in part on weak results from trading.
On Friday, shares of Morgan Chase hit a post-merger low of $16.55. A decline of 60% in the company's stock price has sliced roughly $56 billion from its market capitalization since the deal closed.
