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December 08, 2022 at 08:22 AM
What You Need to Know
- Next year, the reductions could accelerate if markets stay choppy, investors cautious and corporations wary of investing or doing deals.
Morgan Stanley is the latest to unveil job cuts in banking that have been an inevitability for months, but for now at least the story is about pruning rather than hacking back. Next year, the reductions might accelerate if markets remain febrile, investors cautious and corporate executives wary of investing or doing deals.
Fees from fundraisings and takeovers have collapsed by about 50% this year compared with a boom in 2021, leaving investment bankers twiddling their thumbs even as their colleagues on trading desks have been handling huge volumes of business.
Morgan Stanley is to cut about 2% of its workforce, roughly 1,600 people, according to Bloomberg News, although that will leave it with a workforce still nearly 20,000 people larger than before the Covid-19 pandemic began.
Barclays Plc, Citigroup Inc. and Goldman Sachs Group Inc. are among other banks that have begun cutting hundreds of jobs. Bank of America Corp. Chief Executive Officer Brian Moynihan, meanwhile, told Bloomberg TV Tuesday that it would be hiring fewer people as a way of managing its staff numbers lower when people left the bank.
What’s Next?
Across Wall Street, executives are signalling their caution about the year ahead and the likelihood that recessions will arrive for many of the world’s major economies.
Overall revenue for the 10 biggest U.S. and European investment banks in 2022 is set to easily outstrip pre-pandemic levels because the trading boom has more than made up for the drop in other fees. But banks face a knotty problem of how to keep dealmakers happy in areas that have been quiet while still paying big sums to people where activity has been strong.
Goldman CEO David Solomon for one is assuming bumpy times ahead, he told Bloomberg TV on Tuesday, and warned his own staff that pay this year would be lower than for 2021. “We will pay people based on the overall performance of the firm,” he said.
Solomon risks upsetting some traders with this stance as their revenue has boomed while investment banking fees dried up. The bank is already preparing the ground for disappointment as Bloomberg News reported last week.
Big Banks’ Strategy, Issues
Banks are looking to cut bankers not pulling their weight or encourage them to jump ship by handing them derisory bonuses. That follows two years of fighting hard to keep people on board during an industry-wide war for talent.
