Australian investment banker Macquarie Group is expected to slash up to one-thousand jobs amidst a slowdown in M&A activity and tepid global market conditions.
The Australian newspaper reported that the chiefs of each of the company’s principal units are reviewing staffing levels in order to cut costs ahead of an anticipated decline in revenues.
Macquarie's chief executive officer, Nicholas Moore, reportedly may issue a reduced profit outlook at the firm’s annual meeting in Sydney next week.
Last week, an analyst at Citigroup, Wes Nason, said: "Data on announced M&A [mergers & acquisitions] indicate that market share loss continues [for Macquarie[ and the post-bonus exodus of staff appears to have also continued across all major geographies, meaning we are not expecting a near-term recovery of revenues."
Nason suggested that by cutting 1,000 jobs, or 6.4 percent of its workforce, it could climb back on its feet.
"While it has not been Macquarie's historic path, in order to sustain competitive remuneration and help to restore returns to industry standards, some selective reduction of staff [say 1,000] probably needs to occur," said Nason.
Nomura analyst Victor German told The Australian that a significant number of workforce reductions may come from the bank’s investment banking division Macquarie Capital.
"If conditions don't start to improve in the short to medium term, Macquarie's investment banking workforce is arguably too large," German said.
"Macquarie appears to have already reduced staff numbers in its investment banking division. If conditions in the unlisted space and principal-related transactions do not improve in the current levels, Macquarie will have the capacity to further reduce its headcount."
In fact, Macquarie has already cut its European investment banking personnel by about one-third.
Nason of Citigroup also called for a reorganization of Macquarie’s board.
"Recent calls to diversify the board with experienced global bankers and perhaps the rekindling of a formal relationship with former chief executive Alan Moss appear to have merit given recent departures and a diversifying income base," he said.
The company’s share price has plunged 22 percent in just two months.
Moreover, the falling stock price raises the likelihood of Macquarie becoming a takeover target.
Indeed, brokerage and investment group CLSA indicate that Macquarie might be ripe for a break-up.
"With Macquarie trading below book value, and more importantly its likely realizable break-up value, a friendly takeover bid could not be ruled out," said CLSA banking analyst Brian Johnson.