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America’s largest banks have been quietly laying off workers all year – and some of the deepest cuts are yet to come.
Even as the economy has surprised forecasters with its resilience, lenders have cut staff or announced plans to do so, with one crucial exception JPMorgan Chasethe largest and most profitable US bank.
Pressured by the impact of higher interest rates on mortgage business, Wall Street dealmaking and financing costs, the next five largest U.S. banks have collectively cut 20,000 jobs so far this year, company filings show.
The moves come after a two-year hiring boom during the Covid pandemic, fueled by a surge in activity on Wall Street. That faded after the Federal Reserve began raising interest rates last year to cool an overheating economy, and banks suddenly found themselves overstaffed in an environment where fewer consumers were looking for mortgages and fewer companies were issuing debt or buying rivals.
“Banks are cutting costs where they can because things are very uncertain next year,” Chris Marinacsaid research director at Janney Montgomery Scott in a telephone interview.
Job losses in the financial industry could put pressure on the broader U.S. labor market in 2024. With defaults on corporate and consumer loans rising, lenders are poised to make deeper cuts next year, Marinac said.
“They need to find leverage to prevent earnings from falling further and to free up money for provisions if more loans default,” he said. “By January you’ll hear a lot of companies talking about this.”
Banks report the total number of their employees every quarter. While the aggregate numbers obscure the hiring and firing happening beneath the surface, they are revealing.
The deepest cuts occurred at Wells Fargo And Goldman Sachs, institutions struggling with declining sales in key business areas. They have each cut about 5% of their workforce so far this year.
Wells Fargo made job cuts after the bank announced a strategic shift away from the mortgage business in January. And even though the bank has cut 50,000 employees over the past three years as part of CEO Charlie Scharf’s cost-cutting plan, the company isn’t done cutting headcount yet, executives said Friday.
There are “very few parts of the company” that will be spared from cuts, said Chief Financial Officer Mike Santomassimo.
“We still have other opportunities to reduce headcount,” he told analysts. “Turnover remains low, which will likely result in additional severance costs for actions in 2024.”
But the number of employees at the New York-based bank is still declining. Last year, Goldman reintroduced annual performance reviews, eliminating people deemed to be underperformers. The bank will lay off about 1 to 2 percent of its employees in the coming weeks, according to a person familiar with the plans.
As Goldman moves away from consumer finance, its headcount will also decline. The company agreed to sell two businesses to close in the coming months: an asset management unit and fintech lender GreenSky.
A key reason for the cuts is that job turnover in finance has slowed dramatically compared to previous years, leaving banks with more employees than expected.
“The turnover has been remarkably low, and that’s something we just have to deal with.” Morgan Stanley CEO James Gorman said Wednesday. The bank has cut about 2% of its workforce this year as investment banking activity slowed for an extended period.
The aggregate numbers obscure the job creation that banks are still making. While the workforce is at Bank of America Although the number of employees fell 1.9% this year, the company has hired 12,000 people so far, suggesting that even more people have left their jobs.
While CitigroupHeadcount remained stable at 240,000 this year, with significant changes underway, Chief Financial Officer Mark Mason told analysts last week. The bank has already identified 7,000 job cuts linked to $600 million in “repositioning charges” announced so far this year.
CEO Jane Fraser’s recent plan to overhaul the bank’s corporate structure and sales of foreign retail operations will lead to a further decline in headcount in the coming quarters, executives said.
“As we move forward with these divestitures, we will see these heads go down,” Mason said.
Meanwhile, JPMorgan was the industry’s outlier. The bank grew its workforce by 5.1% this year as it expanded its branch network, invested heavily in technology and acquired failed regional lender First Republic, adding about 5,000 jobs.
Even after the hiring spree, JPMorgan has more than 10,000 open positions, the company said.
But the bank seems to be the exception to the rule. Led by CEO Jamie Dimon since 2006, JPMorgan has best navigated last year’s rising interest rate environment, managing to attract deposits and grow revenue while smaller rivals struggled. It is the only one of the Big Six lenders whose shares have risen significantly this year.
““All of these companies have grown year over year,” Marinac said. “It’s easy to imagine there are more quarters where they go backwards because there’s room to cut back and they have to find a way to survive.”
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– CNBC’s Gabriel Cortes contributed to this article.