JP MORGAN CHASE, the Wall Street bank, is cutting 2,000 jobs worldwide, including 400 in the City of London, as it seeks to reduce costs by $700 million (£450 million).

The bank, formed through the mergers of JP Morgan, Chase Manhattan and Robert Fleming, said most of the job losses are expected to be made at its headquarters in New York.

JP Morgan has about 16,000 employees at its investment banking operations at present, down from a peak figure of about 25,000 around the time of the merger of JP Morgan and Chase Manhattan in 2000.

The latest restructuring, which will cost $450 million to implement, was announced as the bank revealed a third-quarter operating loss of $256 million. The loss follows a slump in trading revenues and an increase in debt provisions. It compares with earnings of $702 million a year earlier.

Total net profit for the bank slumped to $40 million from $449 million a year earlier.

The bank also recorded a rise in third-quarter losses at its venture capital division to $284 million from $184 million. Earnings from investment management and private banking were also more than a fifth lower than last year at $98 million. However, earnings at the retail division nearly doubled during the quarter reaching $807 million.

William Harrison, chairman, said: “We have made some mistakes but in my opinion our mistakes have been ones of execution and not of strategy.

“What uniquely hurt us on the downside was too much concentration in the telecoms space, both in private equity investment and lending.”

David Coulter, head of investment banking, said: “Although our competitive results are pretty attractive in Europe and we’re number one in mergers and acquisitions, we are going through the same generalised environment. The changes we’re making in origination and equities will impact Europe significantly.”

Merrill Lynch, the rival investment bank, announced third-quarter earnings of $579 million, compared with $475 million a year earlier, a rise of 22 per cent.

This improvement was attributed to cost cutting which helped to reduce staff expenses by 19 per cent. Staff numbers at Merrill Lynch were cut by 1,200 during the quarter.