Largest American Banks Are Preparing for New Massive Layoffs — 20,000 Jobs Already Cut in 2023 Alone

The biggest banks in the United States have let go of around 20,000 employees since the start of 2023 because of the mortgage industry’s surging interest rates, fluctuations in Wall Street deal-making, and rising funding costs.

According to company filings, five of the biggest U.S. banks are discreetly reducing their workforce numbers following a two-year period of aggressive hiring during the COVID-19 pandemic.

This hiring surge came to an abrupt halt as the Federal Reserve commenced raising interest rates in 2022 to cool down an overheated economy. Consequently, the banks found themselves overstaffed, with a reduced demand for mortgages and companies offering debt deals and mergers.

Wells Fargo and Goldman Sachs led the way in staff reductions, each slashing their workforces by about five percent this year. Wells Fargo had already cut 50,000 positions in the last three years, while Goldman Sachs executed significant layoffs in January. Both institutions are anticipated to continue downsizing in response to shifts in their strategic priorities, although Goldman Sachs is projected to make relatively minor workforce reductions, unlike Wells Fargo.

In 2023, Citigroup, with its 240,000-strong workforce, is already set to cut 7,000 positions this year. Nonetheless, Citigroup’s CEO, Jane Fraser, is looking to revamp the bank’s corporate structure and sell its overseas retail operations, which is likely to lead to additional job cuts in the upcoming months.

“Banks are cutting costs where they can because things are really uncertain next year,” noted Chris Marinac, research director at Janney Montgomery Scott.

Marinac warned that layoffs in the financial sector might have a ripple effect on the broader U.S. job market in 2024 because more companies and people are struggling to pay their loans.

“They need to find levers to keep earnings from falling further and to free up money for provisions as more loans go bad,” Marinac explained. “By the time we roll into January, you’ll hear a lot of companies talking about this.”

Since the start of the Russia-Ukraine conflict in March 2022, banking revenues have started to decline. However, these banks were slow to take immediate measures, hoping for a rebound in revenues and a resurgence in deals. The financial reports released in January show that revenues continued to decrease across several banks during the fourth quarter of 2022.

The sustained decline in investment banking revenues has left banks with little choice but to reevaluate their workforce and make adjustments to deal with less money coming in. While banks regularly disclose total headcount numbers every quarter, these figures mask the ongoing hiring and firing in the background.

Moreover, job-hopping in the finance industry drastically slowed down compared to earlier years.

“Attrition has been remarkably low, and that’s something that we’ve just got to work through,” Morgan Stanley CEO James Gorman said. The bank has had to cut about two percent of its workforce due to a slowdown in investment banking.

With these factors, experts like Marinac believe that several more quarters of contractions may be on the horizon as these banks seek ways to streamline their operations and remain competitive in the face of economic uncertainty.

“All these companies expanded year after year,” Marinac explained.

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“You can easily see several more quarters where they go backward because there’s room to cut, and they have to find a way to survive,” he concluded.

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By Hunter Fielding
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