Layoff Watch

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Vultures Circle Financials: RBS and Nomura on the Menu

Bank of America (NYSE:BAC) announced recently that it would be downsizing again, to a headcount of 260,000 that marks its lowest since the dark days of 2008.

Now it appears that other financial companies are in tough shape, too, as the global economy stumbles and regulations put the squeeze on profits. Among them: Royal Bank of Scotland (NYSE:RBS) and investment shop Nomura (NYSE:NMR).

Best of all, RBS is doing their bank layoffs by PowerPoint. Classy.

This from Bloomberg, with dark comic emphasis mine.

“RBS will eliminate 3,800 jobs at the division by the fourth quarter of next year, compared with an earlier target of 3,500, according to slides based on a presentation delivered by John Hourican, chief of markets and international banking, to analysts today. About 3,000 of the cuts will [be] completed this year, RBS said.

The bank’s control of costs is ‘ongoing,’ said Chris Kyle, chief financial officer of markets and international banking, at the presentation. ‘We will almost certainly hit this year’s number’ in terms of the guidance, he said.”

Hope they had the courtesy to break the news to employees in a better way than that!

Elsewhere, Nomura is in trouble, too. CNBC reports that the investment bank will cut 30% of its Europe investment group. That’s clearly due to trouble in the region that we should all be painfully aware of by now. Of course, all the staffers aren’t located in Europe; some are here stateside, too.

So what does this mean for the financial sector and banking stocks? Well, clearly you can’t cut your way to growth, but these battered firms are doing their best to prop up the bottom line amid a rather lackluster macro picture and tightening regulations.

Financial companies are perhaps the most cyclical of all cyclical stocks, so some of this pain and downsizing is understandable. If you’re an investor who wants to buy in for the long term, you might think now could be a good time to dabble in financials — though to me, with JPMorgan Chase (NYSE:JPM) and Citigroup (NYSE:C) up 20% year-to-date and Bank of America up more than 50%, I have to wonder if that initial snap-back in shares has already happened.

These layoffs hint that banks still are in damage control mode — and for my money, that would hint it’s time to look elsewhere if you want to play with cyclicals.

Of course, a recent guide down for Caterpillar (NYSE:CAT) might mean that many other kinds of recovery plays are seeing headwinds, too … but that’s fodder for another post.

Further reading:

Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

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