Throughout the year, the largest American banks have been discreetly letting go of employees, with further substantial reductions on the horizon. Despite an economy that has defied expectations with its resilience, most major lenders have downsized their workforces or announced intentions to do so, with JPMorgan Chase being the notable exception.
These cutbacks have been prompted by the impact of higher interest rates on the mortgage industry, fluctuations in Wall Street deal-making, and the escalation of funding costs. According to company filings, the five largest U.S. banks have collectively shed 20,000 jobs this year.
These moves follow a two-year hiring boom during the COVID-19 pandemic, driven by a surge in Wall Street activity. However, the tide turned as the Federal Reserve began raising interest rates to cool down the overheated economy, leaving banks overstaffed for an environment with reduced demand for mortgages and corporate debt issuance.
Wells Fargo and Goldman Sachs have seen the most significant workforce reductions, each slashing about 5% of their employees this year. Wells Fargo’s job cuts came as part of a strategic shift away from the mortgage business, and executives have indicated that more reductions are on the horizon.
Goldman Sachs, after several rounds of cuts in the past year, claims to have “right-sized” the bank, but it still foresees a slight decrease in headcount. They plan to terminate around 1% or 2% of their employees in the coming weeks, mainly due to a pivot away from consumer finance.
Morgan Stanley has also experienced a 2% reduction in its workforce this year, primarily due to the slowdown in investment banking activity. On the other hand, Bank of America has seen a dip in headcount by 1.9%, but this is accompanied by a notable influx of new hires.
Citigroup’s staff figures have remained relatively stable, but the bank has already identified 7,000 job cuts in its restructuring efforts, which are expected to reduce headcount in the near future.
Jane Fraser’s plans to restructure Citigroup and the sale of overseas retail operations will further decrease headcount in the coming quarters, according to executives.
In contrast to its peers, JPMorgan has been an outlier in the industry, expanding its workforce by 5.1% this year. They have managed to grow their headcount by aggressively investing in technology, expanding their branch network, and acquiring First Republic. Even with their recent hiring spree, JPMorgan still has more than 10,000 open positions.
CEO Jamie Dimon’s leadership has enabled JPMorgan to navigate the challenges posed by the surging interest rate environment successfully, attracting deposits and growing revenue while other major banks have struggled. It is the only one among the top six banks whose shares have shown significant gains this year.
(Source: Hugh Son | CNBC)
