The CEOs of major US banks are in Washington, DC this week to get grilled by Congress, an annual ritual on Capitol Hill. The economy is looking very different from last year when these leaders appeared before lawmakers, with business slowing and layoffs likely at some banks.
Investment banking revenue fell 39% globally from 2021, according to Dealogic tracking, and banks that made hires amid a surge in deals last year are now changing direction. Big investment banks, including Goldman Sachs and JPMorgan, gave the strongest indication they were looking to cut staff, while other institutions are cutting jobs in departments that have been particularly hard hit by the recession. , such as housing.
Revenue slows at Goldman Sachs and JPMorgan
The New York Times reported on September 12 that Goldman Sachs plans to lay off workers across the company in the coming weeks. Although shedding underperforming employees was once an annual practice, the bank put it on hold during the pandemic. In July, Goldman’s chief financial officer hinted that the bank would bring back annual performance reviews, which typically lead to 1-5% staff reductions, due to a “challenging operating environment”. The Times reported that those cuts would likely be on the lower end of that range.
Goldman has already started laying off at least 25 investment bankers in Asia, Bloomberg reported on Sept. 20.
JPMorgan and Goldman saw their investment banking revenues fall nearly 50% from a year ago, with the two banks bringing in $4.7 billion and $4.3 billion, respectively, as of September 22, from more $8 billion over the same period last year. according to Dealogic. Investment banking accounted for a quarter of Goldman’s total net income last year, while corporate and investment banking accounted for more than 40% of JPMorgan’s net income. At a Sept. 13 conference, JPMorgan Chairman Daniel Pinto said the bank had hired many employees last year to run “huge volume” but acknowledged revenue was down. On the possibility of job cuts, Pinto was cautious: “You have to be very careful when you have a bit of a downturn to start cutting bankers here and there because you’re hurting the possibility of growth at the coming.”
Bank of America CEO Brian Moynihan told Fox News the bank was okay with its September 12 workforce. jobs, but we are in good shape.
Investment bankers who make it through showdown season will likely consider smaller bonuses at the end of the year. A report released in August by Johnson Associates, a compensation consultancy, estimates that incentive compensation for bankers underwriting debt or equity could fall by 45% this year.
Housing crisis leads to layoffs at JPMorgan, Wells Fargo, Citi
The Federal Reserve’s efforts to tame inflation by raising interest rates have hurt the housing industry, with mortgage applications falling to their lowest level in 22 years. As a result, banks with large mortgage businesses have made layoffs in recent months.
“The changes we’ve seen in the mortgage industry are the most significant changes we’ve seen in the shortest time possible given the evolution of rates,” Wells Fargo CEO Charles Scharf said during an interview. of testimony to Congress on September 21. The bank is currently working to downsize its mortgage division and laid off several rounds of staff in Iowa, where its home lending division is based, over the summer.
Citigroup also cut less than 100 positions in its mortgage workforce in September, while JPMorgan laid off hundreds of employees from its mortgage lending division in June.