Merrill Lynch May Cut Up to 2,000 Jobs

NEW YORK —  Merrill Lynch & Co. may cut as many as 2,000 jobs from its brokerage, or about 5.4% of the work force, to lower costs, sources familiar with the situation said Friday.

The biggest U.S. broker would eliminate marketing, strategy and technology jobs at the unit, which employs about 37,000 people, the Wall Street Journal reported Friday. Merrill’s 14,400 brokers would keep their jobs. The cuts, which could be focused on its New Jersey administrative offices, may save the firm as much as $150 million a year.

“They’ve got to boost profits out of this business; the easiest way to do that is to make job cuts,” said Ken Worthington, an analyst with CIBC World Markets Corp.

Merrill’s brokerage head Stanley O’Neal, the former chief financial officer who was named to his post in February, is trying to slice expenses to meet new earnings targets and fend off discount Internet rivals such as E-Trade Group Inc.

Merrill Lynch spokesman Richard Silverman said the firm had no comment on the report. People familiar with the situation said Merrill didn’t plan to provide details about the cuts for at least a week.

The cuts would be part of Merrill’s effort to increase shareholder returns. In May, the firm told investors it plans to boost its pretax margin--a measure of profitability based on income before taxes as a percentage of total revenue--from 18% to 24%. The company expects 1.5 percentage points of that increase to come from its retail brokerage unit.

Overall, Merrill Lynch had 67,200 employees at the end of last year, more than the 55,288 at Morgan Stanley Dean Witter & Co., whose market capitalization is more than twice as large. Merrill’s $48-billion market size puts it in the same league as Goldman Sachs Group Inc. and Charles Schwab Corp., which had 15,361 and 18,100 employees, respectively, at the end of last year.

In 1999, Merrill generated about $519,000 in sales per employee, according to Bloomberg data. That trailed rivals Goldman Sachs and Morgan Stanley. It exceeded results recorded by PaineWebber Group Inc.

Merrill shares fell 75 cents to close at $123.25 on the New York Stock Exchange. The shares have advanced 48% this year, better than the 31% increase in the investment banking group of the Standard & Poor’s 500 index.

Eliminating 2,000 jobs would be the biggest reduction since 1998, when Merrill slashed 3,400 positions following Russia’s default and the near-failure of hedge fund Long-Term Capital Management. The firm was then losing money. In its first quarter of this year, Merrill earned a record $1.04 billion.

O’Neal, an investment banker by training, began making changes last month when he reduced the number of regional districts to 19 from 26 and reassigned their directors.

Most of Merrill’s broker support staff, where the cuts are expected to occur, is in New Jersey.