Sunday, November 16, 2008

Phantom Jobs at Zombie Banks

Lots of juicy items on Reuters this weekend. The undead bank known as JPMorgan is going to fire a lot of people soon:

JP Morgan, the US investment bank, is drawing up plans to axe thousands of jobs across its worldwide operations, reports The Sunday Telegraph.

Not to be outdone, Citigroup is planning on getting rid of people:

Citigroup Inc plans to shed about 10 percent of its global workforce, a person familiar with the matter said Friday, as the bank tries to return to profitability and faces mounting criticism of Chief Executive Vikram Pandit.

I'm glad I don't work for a zombie bank. What these banks don't realize is that they can't cut costs fast enough to remain profitable ahead of renewed credit problems. Trouble with bad credit card debt is just getting started:

Executives told the Reuters Summit the mortgage-inspired crisis infecting markets will likely be followed by even bigger problems borne out of growing credit card debt.

A credit card collapse would further squeeze the financial sector. Americans had accumulated $971.4 billion in revolving consumer debt at the end of September, up 3.4 percent from the end of 2007, according to the U.S. Federal Reserve.

I'm staying the heck away from these two banks as investments. Their balance sheets are indecipherable and their earnings prospects are extremely poor.

Nota bene: Anthony J. Alfidi does not hold positions in JPM or C at the time this commentary was published.