Wall Street Eyes More Job Cuts After Headcount Swells in 2020
(Bloomberg) -- The days of job security on Wall Street were short-lived.
Goldman Sachs Group Inc.’s second round of several hundred firings in the course of three months is another sign that the pandemic pause on layoffs just kicked the cost-cutting can down the road. The bank and its biggest rivals have started to trim small numbers, but 2021 is expected to bring deeper cuts.
Public pledges that employees’ jobs were safe -- along with reduced attrition in the pandemic and continued hiring of new college graduates -- brought the sharpest surge in the headcount of the six biggest U.S. banks in a decade. The firms added almost 20,000 workers in the first nine months of the year.
But as the pandemic drags on, the two newest CEOs at the big six -- Goldman’s David Solomon and Wells Fargo & Co.’s Charlie Scharf -- have turned their attention back to cost-cutting plans. Another, Citigroup Inc.’s Jane Fraser, takes the reins in February with a mandate to make that bank more efficient. There are also doubts that 2021 will continue the flood of trading activity that has delivered the best year in a decade to banks’ Wall Street units.
“We will have fewer people working on Wall Street at the end of next year,” said Michael Nelson, a managing director at executive-search firm Quest Group. “Despite all their profitability from investment banking this year, they are super concerned about next year.”
Executives are also starting to feel the pressure from investors who’ve shown little faith in their shares. Among the six firms, only Morgan Stanley has climbed in 2020, and the four biggest banks have all fallen more than 16% in a year when the S&P 500 Index is up 11%.
The six banks, which employ more than 1 million people worldwide, have reduced their collective headcount by more than 140,000 over the past eight years through job cuts, unit sales and forgoing replacements for workers who leave.
This year has brought a rare respite from the downward trend, helped by banks adding mortgage workers to handle a flood of refinancings. Five of the six lenders have added more than 2,000 employees this year, while JPMorgan Chase & Co.’s workforce has dropped 0.2%. That’s brought higher expenses at every firm except Bank of America Corp., which is sticking by its no-layoffs promise for 2020.
But as the initial shock of the pandemic wears off, the operational success during the upheaval has shown executives that they can continue or even accelerate their long-term effort to get by with less staff by automating many processes.
And management’s resolve to soothe staff worried about job security in a crisis has waned as a persistent virus has forced them to move closer to business-as-usual and seek to boost metrics that matter to their investors.
“A lot of this talk about employee anxiety is virtue-signaling,” said Shiva Rajgopal, a Columbia Business School professor. “Ultimately, stock returns and accounting profits are what drives decisions from the management because they are paid on that.”
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