NEW YORK (CNN/Money) - J.P. Morgan Chase, which warned last month it would be cutting jobs to save money, is reducing its investment banking staff by as much as 20 percent, according to a person familiar with the situation.

But Merrill Lynch, the biggest full-service brokerage in the United States, denied a report that it was also preparing further job cuts. Merrill, which currently employs more than 50,000 staff, has already cut around 15,000 workers in the past year. Merrill Lynch said the story of additional cuts was apparently based on an earlier London Times report.

At J.P. Morgan, the reduction of about 4,000 of the firm's roughly 20,000 investment bankers will come this quarter, the source said.

A J.P. Morgan Chase spokesman declined to comment. But the cuts are not surprising, as investment banks and brokerages have been paring payrolls to cut costs amid the worst bear market in a generation.

Last month, when J.P. Morgan said it would cut an unspecified number of jobs, the New York-based company warned that bad loans and sluggish trading revenue hurt third-quarter profitability.

As for Merrill Lynch, sources had told Reuters that the bulk of the cuts at Merrill would focus on staff in New York and London. Though they did not provide a figure as to how many workers would be affected, the London Times said the bank might cut an additional 1,000 jobs.

But Merrill Lynch spokesman Tim Cobb disputed the story's accuracy. "As previously stated, we continue to actively manage our resources including expenses and staffing in line with the business environment," Cobb told CNNfn. "This means that, while we may reduce headcount in some areas, we are selectively hiring in others. Based on our current assessment of the environment, we believe the bulk of staff reductions are behind us."

The business of underwriting bond and new stocks offering has slowed on Wall Street, which is facing questions about deceptive stock research and conflicts of interest. The Dow Jones industrial average Friday fell to a five-year low.

Like others, J.P. Morgan has suffered because of its associations with Enron, the energy company that went bankrupt in December. Several J.P. Morgan officers were called before Congress last summer because of their alleged role in helping Enron hide debt.

The Morgan job reductions would come amid an already weak labor market. The government Friday said employers cut 43,000 jobs from their payrolls last month.

A late 2000 merger between J.P. Morgan and Chase Manhattan Bank created the New York-based financial services company, which took in $50.4 billion in revenue last year.

Shares of J.P. Morgan Chase (JPM: Research, Estimates) fell $1.08 to $16.54 Friday. They have declined 59 percent from their 52-week high of $40.95 a share.

Merrill (MER: Research, Estimates) shares fell $1.07 to $30.17 Friday.