After two years of hiring staff to handle high trading activity during the pandemic, Wall Street banks may soon face downsizing to match lower activity in capital markets, CNBC reported Monday, citing interviews with recruitment agencies.
Banks were unprepared when central banks pumped trillions of dollars into their economies, fueling capital market gains. An increase in public listings and M&A activity has heightened competition for talent on Wall Street. In addition to staff increases, many companies granted existing staff increases and other concessions.
“I don’t see a situation where banks aren’t doing RIFs (reductions in effect) in the second half of the year,” David McCormack, head of recruiting at DMC Partners, told CNBC.
As an example of the dramatic fall in capital markets, U.S. IPOs fell 91% from a year earlier, Dealogic Data shows. U.S. investment banking revenue fell 43% from a year ago. Equity issuance declined as equity markets fell and debt issuance fell as interest rates rose.
JPMorgan Chase (NYSE:JPM) added 8,000 positions, net, in its corporate and investment banking from the start of 2020 to the first quarter of 2021, CNBC said, and now has 68,292 employees, up 13% from before the pandemic . At Goldman Sachs (NYSE: GS), the workforce increased by 17% to reach 45,100 workers.
“When banks have a revenue problem, they only have one way to respond,” McCormack told CNBC. “It’s by removing costs.”
Other relevant symbols: Morgan Stanley (NYSE: MS), Citigroup (NYSE:C), Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC).
JPMorgan Chase (JPM) Q1 Earnings Beat Consensus Estimates; Corporate and investment banking net profit fell 3% from the fourth quarter of 2021 and 26% from the first quarter of 2021. Meanwhile, JPM CEO Jamie Dimon sees economic risks downward increase.