Prudential to announce sweeping
strategic changes
K A Anantharam
18 December 2000

As investment banks grapple with profit warnings arising from the end of a two-year boom, fuelled by investor appetite for IPOs and junk bond deals, Prudential Securities has announced sweeping changes that could spell the beginning of similar drastic measures from the industry.

With ‘bulge bracket’ firms like Goldman Sachs and Morgan Stanley continuing to dominate deals in a shrinking market, smaller players like Prudential Securities have no option but to resort to drastic measures.

Prudential Securities, the financial services arm of Prudential Insurance, has been pursuing a strategic revamp since October last year, which began with the appointment of John Strangfeld as the new chief executive. It is expected that the firm would axe almost 75 per cent of its investment banking staff, thus ending its attempts to originate business.

This comes close on the heels of the closure of the firm’s institutional bond trading unit which saw a loss of 400 jobs. The balance of the staff may be used as distribution agents to channel business generated by other financial services companies through Prudential’s large broking network.

Prudential Securities, which has been acquiring boutique banks in the recent past to build its presence in a number of markets, has been overtaken by the dramatic and sweeping consolidation in the financial services industry that have made it harder to compete on size. By making these sweeping changes, Prudential could be effectively signalling the end of its efforts to become a 'bulge bracket' diversified investment banker.

Under the new moves, Prudential could well concentrate on its retail equity business which is supported by a network of over 7,000 financial advisers across many countries.

Mr Strangfeld also said that the company would now focus on research in response to the market demand for unfettered, investor-focused research.

This move would make Prudential Securities the first major Wall Street securities firm to use its research capability to primarily serve its individual and institutional investors rather than its investment bank.

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