How many people will Stan O'Neal cut following yesterday's revelation that Merrill made third-quarter losses greater than the GDP of a small African state?
Our reckoning is quite a few. O'Neal is not, after all, averse to a spot of staff hacking. As head of the bank in 2001 he initiated a programme that eliminated nearly a third of the bank's staff, largely through voluntary redundancies.
This time things look a lot worse. In the third quarter of 2001 Merrill's profits fell 52% compared to the previous year, but the bank did at least make a profit of $422m. This time, ML has succeeded in converting a $3bn profit in the third quarter of 2006 into a $2.3bn net loss in the third quarter of 2007.
Back in 2001, O'Neal's first move was to impose a pay freeze on the bank's 65,000 employees. Similar moves appear to be afoot now - Merrill has indicated that third-quarter compensation and benefit expenses are down nearly 50% on last year. In 2001, job cuts swiftly followed - two months after the freeze was reported, 9,000 layoffs were announced.
Headline figures suggest cuts this time could be even more painful. As we noted last month, O'Neal has spent the past few years adding enough staff to populate a small market town - 21,000 or so since the end of 2004; some 8,900 people were added between 3Q06 and 3Q07 alone.
The axe will now come down hard. And with Merrill the only large US bank to have announced a third-quarter loss, O'Neal could yet find himself falling beneath its blow.