Chasing Citigroup, J.P. Morgan Falls Short of Merger's Goals

Top brass at J.P. Morgan ChaseJPM insists it isn't retreating from a 2-year-old ambition to create a financial services juggernaut that can compete in everything from commercial lending to stock underwriting to trading -- a la CitigroupC.

But that's not the way many on Wall Street see it, especially after the bank's announcement two weeks ago that it will shed some 2,200 jobs in its investment banking division and dramatically scale back operations in Asia and Latin America.

While J.P. Morgan executives portray the job cuts as a measured effort to reduce operating costs by some $700 million during a rough economic time, critics see a firm in the midst of a transformation that represents the death of the merger's original vision.

That's because nearly 25% of the job cuts are coming in J.P. Morgan's equities business, an area that was central to the merger's grand scheme but which has never lived up to its billing. Now, that business is likely to get only weaker, as an already lean operation gets cut to the bone.

"They will likely just about kill the equity and retail side of the investment bank," said one Wall Street observer, who didn't want to be identified. "They'll probably get rid of most of the equity research analysts."

Tweaking

J.P. Morgan officials strongly dispute that anything so drastic is in the works. Kristin Lemkau, a bank spokeswoman, said that in light of the sharp downturn on Wall Street and the stock market, "we are adjusting our business to meet those conditions."

In fairness, J.P. Morgan isn't the only Wall Street firm shedding jobs. Citigroup, the nation's biggest financial services firm, is planning to eliminate 1,000 positions, including 200 investment bankers, according to The New York Times. Over the past year, Merrill LynchMER, the nation's biggest brokerage, has slashed more than 20% of its workforce. Overall, the securities industry has eliminated more than 50,000 jobs since the bear market began.