NY Banking Industry Profits Tumble, Leading to Fear of Mass layoffs
By: Hellen Zaboulani
Financial firms are taking a big hit from rising interest rates and fear of recession.
As reported by the NY Post, this has led speculators to worry about hiring freezes and even layoffs on Wall Street. Last week, at an industry luncheon, executives from top banks including JPMorgan and Morgan Stanley, were talking about the likelihood of layoffs of more than 10 percent in the industry, as early as the end of the year. “The conversation was all about when people think hiring freezes will happen and when the layoffs are coming,” a source in the know told The Post.
The dire predictions are a stark contrast to last spring, when junior bankers at Goldman Sachs had such a heavy work load and even reported 100-hour work weeks, which they complained was straining to their physical and mental health. Now, work weeks are closer to 50 to 60 hours. Also, last year, big banks had raised salaries for entry-level bankers in response to the bustling activity in SPACs, also known as “blank check” companies, which became a popular way to take companies public fast. Now, as those SPACs lose steam, those employees are at risk of losing their jobs.
Recently, big banks have seen their profits tank. JPMorgan revealed its investment banking fees fell a 54 percent in the most recent quarter, while Morgan Stanley said its equity underwriting fees were down a whopping 86 percent. So, the blood bath seems to have already crept up silently, due to the slowdown in mergers, acquisitions and big buyouts. Last month, JPMorgan started laying off hundreds of bankers in the mortgage division, citing “cyclical changes.” Insiders speculate that bankers focused on SPACs could be next for the ax, as early as in a few weeks. “It’ll start with smaller layoffs at first — the kids who don’t have anything to do,” one executive told The Post. Another source added, “Jamie Dimon isn’t going to let people sit on the payroll not doing anything for long.”
Banking sources expect that the financial firms won’t announce heavy duty layoffs this summer. They will rather wait for the fall in hopes that there will be a rebound. “The next couple of months are actually a great time for underperformers,” a source said. “Banks are holding onto everyone — If they fire someone they might not get the approval to rehire anyone.” “It’s the worst-kept secret that layoffs will happen,” another insider said. “There is an entire generation that has never been through an economic downturn. It’s going to be new and painful for a lot of people.”
The slowdown in mergers and acquisitions will also impact other industries and in particular law firms specializing in M&A and dealmaking. “The days of firms having someone to get junior associates their dry-cleaning is over,” one insider noted. “Firms are greedy and they’re super sensitive to maximizing profits.”
