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Citibank fires top sector analysts { May 23 2003 } Original Source Link: (May no longer be active)
http://reuters.com/newsArticle.jhtml?type=businessNews&storyID=2806790http://reuters.com/newsArticle.jhtml?type=businessNews&storyID=2806790
Citigroup Fires Seven Top Sector Analysts
Fri May 23, 2003 11:41 AM ET
By Arindam Nag
NEW YORK (Reuters) - Citigroup C.N , the world's largest financial services company, has fired seven top analysts and has temporarily dropped coverage in nine sectors as it realigns its research department, sources familiar with the situation said on Friday.
Analysts let go at Smith Barney, the investment banking unit of Citigroup formerly known as Salomon Smith Barney, include Michelle Applebaum, head of metals and mining research, and Ray Niles, its top utilities analyst, the sources said.
"As a result, our U.S. coverage universe has been reduced by 117 companies, placing current Smith Barney coverage of the S&P at about 70 percent," an internal bank memo issued by Jonathan Joseph, head of U.S. stock research, said.
A copy of the memo was obtained by Reuters.
Citigroup declined to comment, but a spokeswoman said it has recently been aligning its sector coverage in response to market conditions.
The bank is temporarily dropping coverage in utilities, healthcare services, life sciences, industrials, metals and mining, specialty chemicals, telecom equipment/wireless and airlines.
A source within Citigroup said these sectors are being consolidated and coverage on them would be reassigned within two months.
Altogether seven senior analysts have been sacked. Apart from Applebaum and Niles, the bank also let go T.C. Robillard, its wireless telecommunications industry analyst, Michael Millman, who covered a range of companies including H&R Block and Harley Davidson, and biotechnology analyst Lakshmi Bhojraj, the sources said.
Citigroup's airlines analyst Brian Harris and specialty chemicals analyst Gilbert Yang are being given new assignments, the sources added.
Citigroup's changes follows the $1.4 billion settlement between 10 Wall Street banks and U.S. regulators announced at the end of April that forced the largest banks to reassess their research needs, leading several to start firing analysts.
Regulators had charged securities firms with sending out tailored research on companies to gain multimillion dollar investment banking fees.
Now that analysts and bankers are no longer allowed to work together in the pursuit of new clients, analysts -- who do not bring business to the firm like bankers do -- are losing jobs across Wall Street.
At the same time, U.S. authorities forced banks to pay $432.5 million to fund independent research to be made available to small investors, further cutting into already-tight research budgets.
Other investment banks, including Goldman Sachs Group GS.N , Morgan Stanley MWD.N and J.P. Morgan JPM.N , have already cut between 15 percent and 25 percent of their research staffs and slashed compensation for those who remain.
Banks are also mulling the benefits of shipping some research jobs to countries like India, where salaries for business graduates are as little as 10 percent of those in New York and London.
Recently, J.P. Morgan Chase & Co. said it would hire 40 junior stock analysts and other research staffers in its Bombay office this year as a way to expand research in a weak market.
(Additional reporting by Nichola Groom and Chris Sanders)
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