2023 black year for banking sector employees. While this year can be considered positive for banks, thanks to excellent profits, the same cannot be said for bankers who have faced mass layoffs: in a year they have gone up in smoke 60.000 jobs, mainly in investment banks. These cuts were caused by the collapse of commissions and the contraction of profit margins.
This situation is described by asurvey conducted by Financial Times.
Banking: 30 thousand layoffs on Wall Street alone
Altogether they were 61.905 employees were fired in the banking sector, a figure that can be compared to that of the global financial crisis of 2007-2008, when cuts affected 140.000 people.
Half of the layoffs were carried out by large investment banks on Wall Street, which they cut approx 30.000 employees due to the collapse of commissions and the attempt to keep profit margins unchanged. Previously, as in 2015 and 2019, the cuts had mainly affected European banks, affected by the effects of the central banks' zero interest rate policy.
In the banking sector, in addition to layoffs, there was also a downsizing of hiring, initially scheduled after the pandemic.
Wells Fargo makes the biggest cuts
In 2023 Wells Fargo announced i more consistent cuts in the banking sector, with a reduction of 12.000 jobs, bringing the total to 230.000. Of these, 7.000 have already been carried out in the third quarter, resulting in a cost of $186 million. The bank has set aside up to $1 billion for further layoff costs, suggesting the possibility of further job eliminations.
Other significant cuts include those of Citigroup (5.000 seats), Morgan Stanley (4.800) Bank of Americato (4.000), Goldman Sachs (3.200) and JP Morgan Chase (1.000).
Investment banking the most affected activity
The sector most marked by layoffs is that of investment banking business hit by the collapse of commissions and competition with public securities. The policy of increasing rates adopted by the Federal Reserve had an impact, favoring the interest margin but depressing commissions due to fewer transactions and lower valuations of public securities.
To counteract this decrease and maintain profit margins, investment banks have had to act on the cost front, in particular by reducing staff.
Banking: in Europe Credit Suisse is the queen of cuts
Mass layoffs are not limited to the United States, with Europe experiencing massive staff cuts due to banking crises. A significant example is the crisis of Credit Suissewhich was saved and acquired by UBS. The operation protected the banking sector but led to loss of 13.000 jobs during the year, with prospects of further waves of layoffs for 2024.
Sergio ErmottiUBS CEO said next year will be “the pivotal year” for the Credit Suisse takeover, raising expectations of further staff reductions in the months ahead.
Future prospects are not promising
The experts they don't have great optimism for the foreseeable future, underlining that staff cuts will be a constant until there is a recovery in investment banking activity.
The British Metro Bank has already announced its intention to reduce your staff by 20% while other European banks like HSBC e Commerzbank, despite having announced significant staff reductions in previous years, have currently refrained from further cuts.
