November 12, 2008 / 6:49 PM / 11 years ago

Unsold Ferraris, no free drinks as crisis spikes

HONG KONG (Reuters) - From office sodas that are no longer free to Ferraris that go unpurchased, financial services firms and their staff are being forced to a new era of austerity imposed by the global financial crisis.

People check out Ferrari sport cars inside a Ferrari dealer's showroom in Sao Paulo July 22, 2008. REUTERS/Paulo Whitaker

“Canned beer is the new champagne,” Oppenheimer & Co banking analyst Meredith Whitney told the Reuters Global Finance Summit this week in New York.

Financial firms worldwide have slashed more than 130,000 jobs in the current crisis, with thousands more losses expected as banks totter and hedge funds hemorrhage assets.

“To watch the financial industry change as radically as it’s changed, to see the economy changing as radically as it’s changing, you’d be offensively imprudent if you didn’t change your spending,” said Whitney, who became a Wall Street star for predicting the brutal times now confronting banks.

Wall Street bonuses could fall by 41 percent in 2009 — a bigger drop than was seen following the attacks of Sept 11, 2001, the New York state Assembly said. In the City of London, the cash bonus pool is forecast to fall by nearly 60 percent this year , according to the UK’s Center for Economics and Business Research.

Employers are also cutting back on perks such as business-class travel, while once high-flying dealmakers are reining-in the gaudy spending of the recent boom years.

Hugh Young, managing director at Aberdeen Investment Management, the Asian arm of Aberdeen Asset Management, said the firm is trimming costs amid a sharp drop in fees from managing assets so that it is not forced to cut jobs or salaries.

Coca-Colas in the office fridge are gone, he said.

“We can do all that. The last thing of course, which we don’t want to do, is cut people, if it ever comes to that,” he said in Singapore.


Some of the new austerity is fueled by hype, said Anton Schutz, portfolio manager at Mendon Capital in Rochester, New York.

“Everybody’s cutting back. I mean you don’t need the new Ferrari this year,” Schutz told the Reuters Summit in New York.

“The public is spooked,” he said. “Part of it is some sensationalism, some of the headlines just in my local Rochester newspaper are enough to frighten anybody who doesn’t know about Wall St. And there’s no doubt it is scary out there. But people lose all sorts of rational thinking. It becomes panic and fear.”

Chris Ryan, Fidelity International’s managing director for Asia ex-Japan, said the firm was keeping a tight lid on costs, noting it had just moved most staff, with the exception of its investment team, out of Hong Kong’s Central business district to an eastern part of the island with much lower rents.

Rory Tapner, Asia chairman and chief executive at UBS, said the big Swiss investment bank and wealth manager is urging staff to save money by holding meetings via teleconference instead of traveling.

UBS has cut 7,500 jobs globally during the crisis and booked more writedowns than any other bank in Europe.

While staff are encouraged to fly economy class instead of business on short-haul travel, it is not required that they do so, Tapner said.

“If you pick off things and say ‘you must,’ it doesn’t deal with the cultural aspect of it,” he told Reuters in an interview in Hong Kong.

“We’re working hard on the culture that: ‘Nice to have’ is out the window, ‘need to have’, we accept.”

Editing by Anshuman Daga

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