The leading US banks are bracing for potential job cuts, as a persisting economic downturn threatens to impede investment banking activities. Cautionary statements issued by the six major US banks during their third-quarter earnings calls indicate that the sector remains in a precarious position.
JPMorgan Chase & Co.’s Chief Financial Officer, Jeremy Barnum, disclosed on Friday that the bank is currently evaluating its staffing requirements and anticipates a reduction in positions “when appropriate.” Following suit, PNC Financial Services Group confirmed a workforce reduction of 4%, while Wells Fargo & Co.’s CEO, Charlie Scharf, expressed expectations for further downsizing. Citigroup Inc. unveiled plans to eliminate select upper-management positions, in contrast to Bank of America, which does not foresee significant alterations to its workforce levels.
Morgan Stanley, in a Wednesday disclosure, reported a nearly 2% decrease in total headcount compared to the preceding quarter, refraining from specifying the underlying cause for the decline. The economic landscape has been further strained by the Federal Reserve’s recent interest rate hikes and escalating geopolitical tensions, heightening the vulnerability of banking professionals.
The S&P 500 Banks Index, monitoring the performance of large-capitalization banks, has demonstrated a year-to-date underperformance in comparison to the benchmark S&P 500 index. Concurrently, expenses for entities like JPMorgan, Bank of America, and Citigroup have witnessed respective year-on-year increases of 13%, 3%, and 6%, while Wells Fargo recorded an 8% reduction in expenses.
To uphold cost-effectiveness, institutions like Goldman Sachs are strategically investing in their workforce. In a significant move in January, Goldman implemented its largest round of layoffs since the 2008 financial crisis, affecting 3,200 employees. However, the institution has since resumed its annual performance review, potentially leading to further job cuts, as indicated by insider sources. Additionally, surviving employees may face diminished bonus prospects.
A report from New York State Comptroller Thomas DiNapoli estimated a 16% decline in 2020 Wall Street bonuses. Overall, the amalgamation of economic ambiguity and the prevailing operational climate compels US banks to prioritize expense management, resulting in job cuts and remuneration adjustments for their employees.
Source: Reuters
