DealZone

    JPMorgan is cutting 30 percent of its research department, according to two former employees, but the bank is keeping mum about its plans and declined to give details of the cuts.
    David DeRose and Leighton Thomas, co-founders of a Bear Stearns alternative research unit that moved to JPMorgan when that bank acquired Bear a year ago, said on Wednesday they sold the unit to an investment firm largely because they could not hire more staff under JPMorgan’s management.
    “If you stay under a research division that’s being cut 30 percent, we can’t get any headcount,” said DeRose.
    JPMorgan intends to shed 1,000 to 2,000 jobs from its investment bank this year, co-investment bank chief Steve Black said at the bank’s investor day in February.
    It was unclear whether the cuts DeRose mentioned are included in these figures and a JPMorgan spokesman declined comment.
    Research staff may be an easy target for cuts, since it is hard to quantify their contribution to the bank’s bottom line.
    And banks’ research divisions across Wall Street have been shrinking since the Securities and Exchange Commission in 2002 banned firms from using banking fees to pay analysts.

By Elinor Comlay

JPMorgan’s Jamie Dimon may have enough on his plate – for now.

With the bank still digesting its two major purchases from last year — Washington Mutual’s banking operations and Bear Stearns — Dimon seems ready to take a break from deals and focus on integration.  

A worsening economy is also keeping the industry on edge. “Common sense tells you it will get worse and we should prepare for that,” Dimon said on a conference call after the bank announced lower fourth-quarter profit. He said 7.5 percent to 8 percent unemployment is “the minimum we’ll see.”

JPMorgan is “not out there looking” for an acquisition. And there is nothing that the bank is looking to divest, Dimon said.  

Some in the financial industry apparently smell opportunity in the latest round of mergers and blood-letting among top banks.

Referring to the Wells Fargo takeover of Wachovia as the WWF and placing Bank of America CEO Ken Lewis atop a bucking Merrill Lynch bull are just a couple of the attention-getting devices financial sector recruiting firm RJ & Makay uses in its latest promotional You Tube video.

Branching out from a previous video aimed at Merrill Lynch brokers, the new “Billion Dollar Video” (the company claims assets from advisers brought to them via these viral recruiting tools represent billions of dollars) targets all financial advisers but specifically appeals to those currently at Merrill Lynch and Wachovia.

A day after Fox-Pitt Kelton analyst David Trone suggested Lehman Brothers Holdings Inc may be better off going private, the investment bank may be ready to do just that. Lehman Chief Executive Richard Fuld is considering ways to take the Wall Street bank private, but it’s not quite clear how such a move might work, the New York Post reported, citing sources. Lehman’s shares have plunged this year on the back of rumors and questions about its solvency. Talks of privatizing Lehman have got serious as a result, the papers said. The company’s shares closed down more than 14 percent on Monday, reaching their lowest level since August 1999. Lehman’s shares have fallen about 81 percent so far this year. Trone said on Monday Lehman may be better off going private to shake off short sellers that are spreading bogus rumors about the bank.

Those nasty rumors, if that’s what they are, may come back to bite some folks on the hindquarters. The Securities and Exchange Commission has sent subpoenas to more than 50 hedge-fund advisers as it investigates whether individuals spread false rumors to manipulate shares in Lehman and Bear Stearns Cos, The Wall Street Journal said, citing a person familiar with the matter. You remember Bear Stearns, right? You know, the one that initially sold for about $2 a share? No wonder Lehman may be thinking about getting out of the stock market limelight.

And now for something completely different (different from Lehman, anyway). Hong Kong phone company PCCW Ltd says it expects to shortlist bidders for its media and telecoms unit within a month. The deal could fetch more than $2.5 billion. Private equity firms are among those bidding for the newly formed unit, known as HKT Group Holdings, group managing director Alex Arena told reporters on Tuesday. Reuters reported on Friday that the Blackstone Group and Providence Equity Partners were among those pursuing a bid for HKT.

As if having the U.S. Justice Department on your back because your bankers may have been helping wealthy Americans avoid tax wasn’t enough, Swiss banking giant UBS also has to deal with grumpy regulators at home. The head of the Swiss Federal Banking Commission, Daniel Zuberbuehler (pictured), tells us that singling out UBS and Credit Suisse for tough treatment is justifiable and has laid down a tight timetable for new rules to restrain the two. The banks will be required to hoard considerably more capital, which will surely slow them down on Wall St. On Monday, the DOJ said it had asked a federal court in Miami to authorize the Internal Revenue Service to request information from UBS about U.S. taxpayers who may be using Swiss bank accounts to evade federal income taxes. Coughing up tax fraudsters to the IRS could make the sell-off of UBS’s U.S. wealth management backbone – once known as Paine Webber – a tad trickier, but perhaps no less necessary.

A detailed blow-by-blow of the death of Bear Stearns by Vanity Fair’s Bryan Burrough casts current market rumors rumbling about the health of Lehman Brothers in an eerie light. The author, who DealBook notes co-wrote “Barbarians at the Gate,” takes aim at CNBC and hedge funds as it works to uncover what it posits could be the “murder” of the country’s fifth-biggest investment bank. This morning, CNBC’s Charlie Gasparino and DealBook editor Andrew Ross Sorkin are talking about the prospects for Lehman being “taken out”.

High in the “priced to move” column, commercial lender CIT Group agreed to sell its home lending business to private equity firm Lone Star Funds for $1.5 billion in cash to increase liquidity, and said it would take a related second-quarter charge of $2 billion. CIT also agreed to sell its $470 million manufactured housing portfolio to Vanderbilt Mortgage and Finance for about $300 million. “These sales complete our exit from all home lending businesses, removing the uncertainty surrounding this asset class,” Chief Executive Jeffrey Peek said. Lone Star will also be taking on $4.4 billion of outstanding debt and other related liabilities. Home lending may not be that far off the path for CIT, but getting out of the business certainly helped tax preparer H&R Block, which announced strong results and a better outlook yesterday, so any price is clearly worth it – CIT’s stock was up over 11 percent in premarket trade.

The other shoe — or is it an ax — is finally dropping for staff at Bear Stearns, with letters going out this week telling them whether they’ll keep their jobs when JPMorgan’s acquisition is complete.

One Bear employee who works in the emerging markets business in London has received confirmation he will be laid off, he told Reuters on Wednesday. Another in the same department said he was expecting to hear later in the day that he would be retained.

“Some individuals and some businesses are beginning to hear what their status is,” added a source close to the bank.

JPMorgan Chase boss Jamie Dimon and New York Fed President Timothy Geithner are among the banking executives and regulators testifying before the Senate Banking Committee on Thursday about the Fed-backed takeover of Bear Stearns.

Click here to read Geithner’s prepared opening statement. He justified the Fed-funded J.P.Morgan buyout of Bear Stearns as the lesser of two evils, saying the risks of allowing the bank too fail were too great and unpredictable.

Click here to read Dimon’s statement, in which he says JPMorgan would not have offered to buy Bear Stearns if the Fed had not agreed to absorb billions of dollars in potential losses.

Bear Stearns shares are trading well above $10 after JPMorgan quintupled its offer for the troubled investment bank, and even the most prosaic pieces of memorabilia are keeping pace on eBay.

Following up on our post from last week, Reuters’ Jennifer Ablan reports that a used extra-large men’s T-shirt, blue, with a white Bear Stearns logo sold for a whopping $151.76 on Monday evening.

The T-shirt seller, Jennifer Cseplo of Dublin, Ohio, said her husband got the shirt as a gift four years ago and wore it to work out in.

 Ford‘s soon-to-be-signed sale of Jaguar and Land Rover to Tata Motors could bring in as much as $2.65 billion, according to local TV, or $2 billion according to the FT. Though the stage appears to be set, a Tata Group spokesman told Reuters discussions were ongoing. Tata Motors, India’s top vehicle maker maker of trucks and busses, received union backing for the deal and was named the front-runner in January by Ford, which is seeking to shore up its balance sheet and reduce debt.

JPMorgan‘s revised takeover offer for Bear Stearns is a “high risk transaction,” Punk Ziegel analyst Richard Bove said after JPMorgan boosted its all-stock offer five-fold to about $10 a share. “What is most disturbing about this deal is that it uses a great deal of Morgan capital to buy a company that is losing market share, in a series of businesses that are declining in size, with a top management team that is best described as sclerotic,” the veteran bank watcher wrote in a note to clients. “Investors believe that JPMorgan is underbidding for Bear Stearns… I do not. … Bear Stearns is a deeply troubled company which would have no value if the Federal Reserve had not stepped in to bail it out.”

China’s state-owned aluminum giant Chinalco - which teamed up last month with Alcoa to buy a $14 billion stake in Rio Tinto - may spend more than $4 billion this year on acquisitions at home and abroad, according to the South China Morning Post. That’s no great pile of investment. BHP has bid $147 billion for Rio. Though the company did not specify targets, it said non-ferrous metals would be the main focus.

The aftershocks of Bear Stearns’ collapse are front and center. China’s CITIC Securities is moving on, formally calling off its $1 billion strategic tie-up; JPMorgan is moving in, ditching plans for a new office building now that it owns the $1.5 billion Bear Stearns HQ.

The Federal Reserve — hours away from the most aggressive rate cut in years — is arranging shotgun weddings for failing financial institutions, but policy makers might be running out of eligible suitors. “There may be some potential buyers left, but the list is looking pretty thin,” said Adam Compton, co-head of global financial stock research at RCM Global Investors.

Across the Atlantic, the European Commission said that while it was not asking for job cuts at stricken British mortgage lender Northern Rock, the bank would have to slim down to be a viable business in the future without state support. UK newspapers reported that one-third of staff could be axed.