Warburg points a warning

WITHIN 24 hours of our story last Sunday that City job losses were on the way, S G Warburg issued a profits warning, revealing it had made no money in market-making and proprietary trading over the previous six months. There'll be no binliners on the desks at Warburg, but it seems likely that many of the jobs of the 400 or so who leave the group each year through 'natural wastage' won't be refilled. Warburg - Britain's answer to Goldman Sachs, Salomon Brothers and the other integrated securities houses of Wall Street - is pulling in its horns.

Wrong-footed banking analysts have been blamed for failing to understand what was going on in their own industry. Trading volumes in bonds and some equities have been diabolical. And the price falls have added to the pain for houses dealing on their own account.

The analysts aren't wholly to blame. True, they might have paid more attention to the AGM statement on 29 June, when the chairman, Sir David Scholey, sounded a warning note. Instead, Warburg shares were marked up that day.

But the idea that outsiders can accurately predict six months' dealing profits in a modern-day securities house is laughable. With markets as volatile as they have been, the position alters dramatically by the week. And for houses indulging in heavy proprietary trading, it changes by the day. Demands for quarterly reporting can only get louder.