11/21/2008

Citi, Morgan Stanley Speeding Up Retreat


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CORRECTION: A Nov. 21 article, "Citi, Morgan Stanley Speeding Up Retreat," contained errors. The item overstated layoffs within John Wood's analytics group, which was reduced to 19 people from 27. In the mortgage-finance division, Jon Riber remains at Citi, contrary to what was stated in the piece. Matt Fallon's name was also misspelled. The article misstated the roles of mortgage-finance head Susan Mills and securitization chief Ted Yarbrough. Overall, Citi says it employs about half as many securitization staffers as it had on board a year ago. ----------

Citigroup laid off a wide swath of its structured-finance team on Wednesday morning, as Morgan Stanley also pruned its staff.

Citi's cuts removed a large chunk of its analytics, mortgage-finance and CDO-underwriting units, signaling that the once-mighty investment bank is further reducing its already diminished involvement in the securitization business. Likewise, Morgan Stanley appears to be implementing a plan that would essentially gut its asset-backed bond team in New York.

Citi carried out its dismissals as part of an effort to reduce its overall headcount by 50,000, adding to a string of layoffs that have already taken place at the bank since the credit crunch began. Word has it that more layoffs are coming.

The securitization-analytics group was perhaps the hardest hit this time around, with just group head John Wood and two analysts remaining from what was a 20-person unit a few days ago. Wood's crew sets up computer programs used to structure asset- and mortgage-backed transactions at Citi. The unit's dismantling sends a strong signal that the bank intends to keep its distance from the market.

Among those gone from the mortgage-finance division are Perry DeFelice, Ranie Guo, John Riber and Matt Sallan. Each specialized in packaging prime-quality and subprime home loans into bond offerings, working for both Citi and outside clients.

Also cut loose was collateralized loan obligation specialist Fred Engel, who had joined Citi's CDO-underwriting team from UBS last year. He often worked on repackagings of Citi's own loans, reporting to CDO head John Clements.

It's unclear how many workers are left on Citi's securitization team, but the group was already considerably reduced from the 100-person headcount it maintained before the credit-market collapse. Back then, the institution was one of Wall Street's most active underwriters of structured products.

While Citi pulled back after its structured-finance dealings caused heavy losses in late 2007 and early 2008, it has slammed on the brakes especially hard in the past few months. Since June 30, the bank has managed just $2 billion of securitizations in the U.S., down from $28.8 billion during the first half of the year.

Among the groups spared from this week's layoffs, meanwhile, were the asset-backed commercial paper origination, asset-backed bond underwriting, ABS trading and securitization-syndicate desks. Structured-finance chief Ted Yarbrough is still on board. So are syndicate head Ish McLaughlin and deputy Amanda Magliaro, along with top ABS trader Susan Mills and analytics executive Steve Blatt.

But with more layoffs in the works, Citi insiders said virtually the entire securitization staff is fair game.

Like Citi, Morgan Stanley has already carried out heavy workforce reductions since the credit crisis began. Now the word is that much of its remaining securitization staff is either gone or is about to be cut loose.

This week, the bank showed the door to Nicole Limberg, a vice president in the asset-backed securities banking division who had come on board a few years ago from J.P. Morgan. ABS salesmen Dan Hughes and Richard Korzelius were also laid off.

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