The top US banks are treading cautiously amid lingering economic uncertainty, with the prospect of a slowdown in investment banking activity casting a shadow over their workforce. During their third-quarter earnings calls, six major US banks voiced concerns, hinting that job cuts might be on the horizon. While the economy has shown signs of recovery, it appears the institutions are not entirely out of danger.
JPMorgan Chase & Co.’s Chief Financial Officer, Jeremy Barnum, announced on Friday that the bank is reviewing its staffing needs and will reduce positions “when appropriate.” In the wake of these remarks, PNC Financial Services Group swiftly followed suit, unveiling a plan to cut its workforce by 4%. Wells Fargo & Co.’s CEO, Charlie Scharf, also chimed in, suggesting that the bank is exploring further opportunities for layoffs.
Citigroup Inc. is gearing up to eliminate some positions from its upper management tiers, while Bank of America expressed its intention to maintain its current headcount levels without making any substantial changes. Morgan Stanley reported a near 2% decline in total headcount compared to the previous quarter, though they did not specify the reason for the reduction.
The economic environment has been marred by a combination of factors, including interest rate hikes by the Federal Reserve and mounting geopolitical tensions, intensifying the risks faced by bankers. The S&P 500 Banks Index, tracking the performance of large-capitalization banks, has notably underperformed the benchmark S&P 500 index year-to-date.
In addition to these external challenges, expenses for banks such as JPMorgan, Bank of America, and Citigroup have surged by 13%, 3%, and 6%, respectively, compared to the previous year. In contrast, Wells Fargo has managed to reduce its expenses by 8%. To ensure cost-effectiveness, some banks, like Goldman Sachs, are making selective investments in their workforce. In January, Goldman initiated its most substantial round of layoffs since the 2008 financial crisis, letting go of 3,200 employees. There are whispers that the bank may continue with job cuts as part of its annual performance review.
Furthermore, even those employees fortunate enough to retain their positions may have to contend with lower bonuses. A report from the New York State Comptroller, Thomas DiNapoli, estimated a significant 16% decline in Wall Street bonuses in 2020.
Overall, the current economic uncertainty, coupled with the challenging operating environment, is prompting US banks to take a cautious approach to safeguard their expenses by keeping unemployment low, resulting in job cuts and reduced pay for their workforce.
Source: Reuters
