Largest banks in America have collectively cut 20K JOBS so far this year

The largest banks in America have collectively laid off approximately 20,000 employees since the beginning of 2023 due to rising interest rates in the mortgage industry, Wall Street deal-making fluctuations and increasing funding costs. According to company filings, five of the largest banks in America are quietly cutting thousands of employees after a two-year hiring boom during the Wuhan coronavirus (COVID-19) pandemic. This hiring spree was abruptly curtailed as the Federal Reserve initiated interest rate hikes in 2022 to temper an overheated economy. As a result, banks became overstaffed, with fewer people getting mortgages and companies offering debt deals and mergers. Wells Fargo and Goldman Sachs had the most layoffs, with both banks downsizing by approximately five percent this year. Wells Fargo had cut 50,000 jobs over the past three years, while Goldman Sachs had large-scale layoffs in January. Both banks are still expected to reduce their staff due to changes in their business focus, but unlike Wells Fargo, Goldman Sachs would only have a few layoffs.

Citigroup, which has a workforce of 240,000 employees in 2023, is already planning to cut 7,000 jobs this year. However, Citigroup CEO Jane Fraser's plan to overhaul the bank's corporate structure and the sale of overseas retail operations are expected to further reduce headcount in the coming months.

"Banks are cutting costs where they can because things are really uncertain next year," noted Chris Marinac, research director at Janney Montgomery Scott. Marinac warned that job cuts in finance could impact the overall U.S. job market in 2024 because more companies and people are struggling to pay their loans. (Related: Layoff saga continues as 12 more companies announce mass employment terminations.) "They need to find levers to keep earnings from falling further and to free up money for provisions as more loans go bad," Marinac explained. "By the time we roll into January, you'll hear a lot of companies talking about this."

Big banks reevaluate their workforce due to sustained decline in revenues

In an article published by E-Financial Career earlier this year, leading banks like JPMorgan, Bank of America and Citigroup had announced their plans to lay off employees due to a persistent decline in investment banking revenues. Since the outbreak of the Russia-Ukraine war in March 2022, banking revenues have begun to plummet. But these banks hesitated to take immediate action in the hope that revenues might rebound and deals would return. The financial reports released in January reveal that revenues continued to decline across multiple banks throughout the fourth quarter of 2022. The sustained decline in investment banking revenues has left banks with little choice but to reevaluate their workforce and make adjustments to deal with less money coming in. While banks regularly disclose total headcount numbers every quarter, these figures mask the ongoing hiring and firing in the background. Moreover, job-hopping in the finance industry drastically slowed down compared to earlier years. "Attrition has been remarkably low, and that's something that we've just got to work through," Morgan Stanley CEO James Gorman said. The bank has had to cut about two percent of its workforce due to a slowdown in investment banking.

With these factors, experts like Marinac believe that several more quarters of contractions may be on the horizon as these banks seek ways to streamline their operations and remain competitive in the face of economic uncertainty.

"All these companies expanded year after year," Marinac explained. "You can easily see several more quarters where they go backward because there's room to cut, and they have to find a way to survive."

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Big banks reevaluate their workforce due to sustained decline in revenues

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