Despite the economy proving to be surprisingly strong, various lending institutions have either reduced their staff or expressed plans to do so, the exception being JPMorgan Chase. The top five U.S. banks have reduced their workforce by a total of 20,000 employees this year (according to official records). This reduction is primarily caused by the sharp decline in personnel movement within the financial sector, leading to a greater number of staff than anticipated.
Despite the economy having performed better than anticipated this year, the biggest American banks have been quietly letting go of personnel and further reductions in staffing are expected. With the exception of JPMorgan Chase, the five leading US banks have cut a total of 20,000 jobs in 2021 alone in the wake of a two-year recruitment surge spurred by Wall Street activity during the pandemic. The increased interest rates implemented by the Federal Reserve have had a lasting effect as consumer demand for mortgages has dropped as fewer enterprises have taken on debt or attempted mergers.The box was too big to fit through the door.
The box was too large to go through the door.
"Chris Marinac, research director at Janney Montgomery Scott, spoke by phone and stated that banks are trying to cut back expenses, since the upcoming year is quite unpredictable. It was suggested that in 2024, job losses in the financial sector may have a negative effect on the entire US job market. Marinac went on to explain that faced with increasing defaults on both business and customer loans, loan providers are prepared to make much bigger savings for the coming year. He added that they need to use methods to prevent income from decreasing more, and also to liberate funds to cover debts if even more loans are not paid. Marinac ended by saying that by the start of January, it'll be common to hear numerous firms discussing this issue."
Quarterly, banks reveal overall staff numbers. The figures, albeit hiding what is happening in the background, are still informative. The largest reductions in personnel have been at Wells Fargo and Goldman Sachs, two institutions that have seen dips in profits from primary activities. Each has downsized by about 5% of their workforces in 2021.For Wells Fargo, the job cuts followed an announcement in January of shifting strategies away from mortgage. Even after 50,000 employees have left in the last 3 years as part of CEO Charlie Scharf's financial efficiency plan, the organization is not done trimming its staff. Mike Santomassimo, CFO, stated that there are "very few parts of the company" that will be spared. He went on to note that due to continued low rates of attrition, additional severance costs in 2024 are likely.
After a series of cutbacks in the past year, Goldman Sachs executives stated that they had "right-sized" the company and do not anticipate any more large-scale redundancies such as the one enacted in January. Nevertheless, staff numbers are still decreasing at the New York banking corporation. Last year, Goldman resumed annual performance appraisals where people seen as sub-par contributors were cut. Sources familiar with the plan say that in the coming weeks, the bank will terminate around 1% to 2% of its personnel. Headcount will also dwindle due to Goldman's shift away from consumer finance; the firm agreed to sell two of its services in upcoming months, a wealth management unit and fintech lender GreenSky. A core aspect driving the job losses is that job-switching in finance drastically declined from past years, leaving financial institutions with more people than originally predicted. "Attrition has been remarkably low, and that's something that we've just got to work through," Morgan Stanley CEO James Gorman noted Wednesday. This year, the bank lowered its workforce by about 2% due to a continued slowdown in investment banking.
However, the overall numbers hide the hiring that banks are still engaging in. Even though headcount at Bank of America dipped 1.9%, the firm has employed 12,000 people so far, implying that a bigger number of people left their jobs.
Mark Mason, CFO at Citigroup, informed analysts of significant adjustments to its staff, with 7,000 job cuts and $600 million in "repositioning charges" already identified this year. He indicated headcount would be further reduced due to CEO Jane Fraser's latest plan to overhaul the bank's corporate structure and the sale of overseas retail operations. On the other hand, JPMorgan has been the anomaly, increasing its staff by 5.1% this year, and currently has more than 10,000 open positions. Credited to the leadership of CEO Jamie Dimon since 2006, the bank has been the only Big Six lender whose stock grew in 2020. Analyst Marinac admits there is plenty of room for other banks to cut if they are to survive this difficult period.
Gabriel Cortes of CNBC assisted in composing this article.
Comentarios