Ratings agencies have cut more than 500 jobs this week, with an expectation for more to come, as the prospects for complex debt ratings wither.
Dominion Bond Rating Service, the Canadian agency, compounded news of job losses at Moody’s Investors Service and Standard & Poor’s on Monday and Tuesday, with the news that it would pull out of Europe only a year after opening offices on the continent.
Fitch Ratings, the third member of the big three with S&P and Moody’s, is also considering some cuts due to the poor outlook.
Analysts at Barclays Capital have predicted a fall in issuance of mortgage-backed bonds and other securitisations of more than 40 per cent this year, while Citigroup analysts have predicted that the more complex collateralised debt obligations market will contract by about 60 per cent.
Moody’s was the first to slash staff numbers in the face of the global credit crunch this week, announcing the loss of 275 jobs, or 7.5 per cent of staff, which would result in a fourth-quarter charge of $43m-$48m.
The agency said the cuts were due to “an anticipated decline in new securities issuance in some market sectors”, but would not add detail on exactly where the job cuts would come.
McGraw Hill announced more than 600 job cuts late on Tuesday, 172 of which will come from S&P at a cost of $18.8m to the rating agency, index and publishing business.
The remaining McGraw Hill job losses mainly come from the education text books and service business, which loses 304 staff though at a lower charge, and from the information and media side which loses 114 jobs.
However, analysts at Citigroup said the structured finance downturn clouded the outlook for S&P in particular and could lead to further job cuts and charges.
DBRS, meanwhile, is to cut more than 25 per cent of staff globally and close its London, Paris and Frankfurt offices almost exactly a year since it launched a mission to challenge the sector’s Big Three on the continent.
DBRS had recruited Sam Theodore, formerly head of European banking analysis at Moody’s, to head a team of analysts covering European financial services companies. It had also poached a team of quantitative analysts for the structured finance side from Standard & Poor’s.
Those people will now lose their jobs among a total of 43 cuts in Europe and the closure of DBRS’s three offices in London, Frankfurt and Paris. The agency is also cutting a number of European- focused positions in Toronto and New York, which will see its total headcount cut from 270 to about 200.