Merrill Lynch cuts herald City cull

DESPITE THE seismic changes convulsing their company, it seemed like a normal day for the smokers at City giant Merrill Lynch yesterday.

Gathering in small knots outside the bank's headquarters in the damp grey afternoon air, the shirt-sleeves-and-Marlboro brigade were clearly seeking high-pressure solace from the news that many of them are soon to be out in the cold for good.

However, with some pounds 250m set aside to cover redundancies, making an average pay-off of about pounds 100,000, the blow for many will be softened.

The job cuts form part of a series of losses expected to sweep across the City as banks count the cost of disastrous investments in high-risk markets such as Russia, Asia and Latin America. Exposure to hedge funds, high-risk investments, has taken its toll. ING Barings has already announced 1,200 worldwide job cuts and Daiwa Securities is cutting 800 outside Japan.

Headhunters have estimated that as many as 40,000 jobs from the 375,000- strong City workforce in the Square Mile could go over the next eight months.

Merrill Lynch is currently leading the $4bn bail-out of Long-Term Capital Management, the hedge fund whose financial difficulties sent the markets into tailspin last month. It is one of the organisations that has expanded particularly aggressively in London. Merrill Lynch bought Smith New Court, one of the best-known stockbroking firms, in 1995, and early this year Mercury Asset Management, one of the best-established firms of fund managers.

The company whose ballsy image is typified by the logo of a rampant bull emblazoned outside and whose members are known as "The Thundering Herd" was yesterday absorbing poor third-quarter financial results which will lead to a total of 3,400 personnel going from its worldwide staff of 65,000. Four hundred will go in Britain.

These will be lost through "severance and attrition", according to the official statement from Merrill Lynch's New York headquarters.

Chaos on the world markets since August is blamed for the results which, once redundancy pay is taken into account, show the company posting a loss of $164m (pounds 97m).

Its logo is now the only remnant of the record bull market that helped it to make $502m profits over the same period last year.

At lunchtime, standard Merrill Lynch drinking haunts were bereft of their usual clientele. They were all waiting for the results to be posted at 12.45pm, and then for the video broadcast statement from the company's chairman and president, David Komansky. There was a flurry of activity as workers from outlying offices went into the headquarters to hear the bad news.

In a memo, the company told staff: "This is clearly not a decision we have taken lightly and we do regret the need to take such action, but in the current market environment it is important that we respond quickly and adjust our expense base."

Michael Marks, who heads the London operation, said that on Wall Street some of those affected will be notified today.

About 15 minutes later they all re-emerged - many lighting up as they came through the glass doors, before going back to their desks.

There seemed to be a lot of people smoking at Merrill Lynch yesterday. One particularly worried-looking man came out for his second cigarette within half an hour of the last, pacing up and down with heavily furrowed brow.

Few, unsurprisingly, wanted to talk, saying that it was not known who was going and who was staying - it was a question of wait and see.

"No comment" was the most common response.

One employee, who declined to give his name, said: "The atmosphere is very tense. There is a lot of uncertainty and speculation with respect to these job losses.

"It is not as if we're just being handed a list of names. It is a case of just hanging in there and waiting to find out."

Another employee confirmed that there was particular fear in some departments.

But he said: "Although the news is disturbing I think one has to understand that this is the risk one takes when one chooses to work in this business. Nothing is secure."

One group, smoking of course, waited for taxis with bags apparently well and truly packed. Were they the first to go? No. They were on their way to a university recruitment presentation. Now that would be a pitch worth hearing.