JPMorgan Layoff 12,000 WaMu Employees

Posted by Kris | Thursday, February 26, 2009 | | 0 comments »

JPMorgan to cut 12,000 jobs as it folds in Washington Mutual operations, sees savings of $2B

According to slides on the company's Web site from an investor day presentation, the New York bank expects about $2 billion in net savings to be achieved through the acquisition, the majority of which will be realized by the end of this year. This includes about $1.35 billion related to the job cuts, the bank said.

JPMorgan acquired the assets of Seattle-based WaMu, the largest bank ever to fail in U.S. history, at the end of September. Since JPMorgan took over operations of the bank through Feb. 13, WaMu deposits have increased by $500 million. This follows the withdrawal of $15 billion in deposits during the two weeks in September following the bankruptcy filing of Lehman Brothers Holdings Inc., which led to the bank's failure.

Earlier this week, the bank announced plans to slash its quarterly dividend to 5 cents per share from 38 cents in an effort to preserve capital.

Chief Executive Jamie Dimon said the cut was a precautionary move to ensure that the company has financial flexibility should economic conditions worsen. The move will save the company about $5 billion per year.

Dimon said he is not predicting, but is ready for: A recession lasting two years, a U.S. unemployment rate above 10 percent, and a 40 percent peak-to-trough decline in home prices.

Dimon expects the bank to be profitable throughout 2009, and said the bank is on track to report first-quarter profit roughly in line with analyst expectations.

Analysts surveyed by Thomson Reuters, on average, forecast earnings of 33 cents per share for the first quarter.

JPMorgan has yet to post a quarterly loss during the financial meltdown that began in 2007, when mortgage defaults started spiking. The bank in January reported a modest fourth-quarter profit of $702 million -- thanks mostly to its purchase of Washington Mutual, which boosted its consumer banking business. Kris:  Survival of The Fittest

JPMorgan on Monday said it expects first-quarter markdowns of about $2 billion in its investment bank -- less than the $2.9 billion marked down in the fourth quarter. The New York-based bank also anticipates its credit card loss rate to edge up to 7 percent; further deterioration in home loans; and approximately $400 million write-downs in its private equity business.

JPMorgan, like San Francisco-based rival Wells Fargo & Co., has received $25 billion in government aid. Weaker competitors Citigroup Inc. and Bank of America Corp. have each gotten $45 billion in government capital.