LONDON (FT) - Banks including Credit Suisse, Goldman Sachs, Morgan Stanley and Bank of New York Mellon have begun to cut more than 15,000 jobs in as executives are under pressure to cut costs following a collapse in investment banking revenue.
The lay-offs – which are expected to number in the thousands across the sector – reverse the massive hiring banks have done over the past few years and a reluctance to fire employees during the Covid-19 pandemic.
“The job cuts that are coming are going to be brutal,” said Lee Thacker, owner of financial services headhunting firm Silvermine Partners. “It’s a reset because they’ve hired more in the last two to three years.”
Banks including Credit Suisse, Goldman Sachs, Morgan Stanley and Bank of New York Mellon have begun cutting more than 15,000 jobs in recent months, and industry watchers expect others to follow suit. Excited about the headline-grabbing schemes announced since.
“We’ve seen some warning shots from the US,” said Thomas Hallett, an analyst at Keefe, Bruyette & Woods.
“Investors need to see management working on costs and trying to maintain a reasonable return profile. Europeans will follow US banks.”
Anna Arasov, co-head of global banking at Moody’s, said she expected job cuts to be less severe than during the financial crisis, but heavier than the collapse in markets following the dotcom crash in 2000.
“What we are seeing is a catch-up of the normal bank lay-offs that stalled over the past few years,” she said. “We will see trimming in European franchises, but not as large as the U.S. banks.”
Bank officials said Goldman’s lucrative lay-off – part of its biggest cost-cutting drive since the financial crisis that included everything from corporate jets to bonuses – set a precedent that other banks could follow. Would like to
“The Goldman headlines are speeding up decision-making,” said an industry executive with knowledge of several banks’ plans. “If you follow Goldman this is a good time to announce painful cuts.”
The Wall Street bank last week began the process of laying off 3,200 employees, equivalent to 6.5 percent of its workforce, as pressure mounted on Chief Executive David Solomon to improve the bank’s return on tangible equity.
Goldman is cutting the same number of employees as it did in 2008 during the depth of the global financial crisis, but then its workforce was two-thirds its current size.
Morgan Stanley laid off 1,800 employees in December, just 2 percent of its workforce. Despite having a strong wealth management business, the lender’s investment bank suffered losses with its fierce rival Goldman Sachs accounting for nearly half of M&A revenue last year.
Morgan Stanley said further staff cuts were not imminent.
“We were clearly overdue a bit,” Chief Executive James Gorman told analysts. “We hadn’t done anything for a few years. We’ve made a lot of growth, and we’re going to continue to track that.”