Alex. Brown Inc., a venerable Baltimore-based brokerage house, is planning to cut 34 employees today as the nation's oldest investment banking firm takes its first step to respond to a slumping financial market.
The layoffs, 25 to 30 of which will come in the Baltimore office, are expected to affect primarily the investment banking, research and trading areas of the company, according to well-placed sources involved in the plans.
More cutbacks could follow, pending additional review of the company's various lines of business, though no major layoffs are expected, the sources said.
Alex. Brown, parent of Alex. Brown & Sons, has about 1,600 employees at its headquarters and 18 offices nationwide, an estimated 1,000 of them in Baltimore.
"What we're doing is that business has clearly been at lower levels, and our expectation is it's clearly going to be at lower levels" in the future, said an Alex. Brown executive who spoke only on condition of anonymity, citing the fact that employees had not yet been told of the plans.
"It's just a matter of [determining] what staffing is appropriate looking ahead in the different business areas," he said.
The decision to trim back its work force comes in stark contrast to moves made in recent years during which Alex. Brown bolstered its investment banking division and research departments as the company consistently ranked among the top equity underwriters in the country.
In recent months, however, the markets -- as well as the prospects for the future -- have changed dramatically. The capital markets area -- providing underwriting services, institutional trading, mergers and acquisitions work and research has particularly suffered as the financial markets retrenched.
Alex. Brown's move was explained by the sources as reflecting an industry-wide drubbing that has hit a number of Wall Street firms in recent months as the market for newly issued stock -- the core of Alex. Brown's investment banking business -- has virtually dried up.
While the capital markets division at Alex. Brown has been one of its most profitable and provided roughly one-third of its $291 million in revenue last year, it is that area that has been primarily targeted for the layoffs, according to the sources.
With the Aug. 2 invasion of Kuwait coming at a time when the market was already slumping, the company's activity in investment banking -- one of the most profitable lines of business -- has been sorely hurt in recent months, the sources said.
"Our capital markets business in the first half of the year was quite strong -- up nicely over the prior year's first half," one source said. "But the second half, it's come down significantly."
While not providing any specific figures, the source said that "it's running at a level of business that unless we were to do something with our costs, we'd probably not be particularly profitable."
The sources said that the company is not planning to get out of any particular lines of business and that staff cutbacks are expected to be minimal.
"It happens that we're going through our planning cycle and so that causes us to take a look at all aspects of the business," the executive said.
"We don't anticipate major waves of layoffs that result from any of this."
Today's move, which has been in the planning stages for a relatively short time, the sources said, comes about a month after the company reported that it lost $3.1 million, or 21 cents a share, during the third quarter in contrast to earnings of $6.3 million, or 38 cents a share, a year ago.
Revenue fell 27 percent to $58 million for the three-month period that ended Sept. 28 compared with revenue of $79.6 million for the same period last year, the company said.