More layoffs expected as major banks slash thousands of jobs

Job cuts are on the horizon for the largest American banks as they face pressure from various economic factors. Despite the economy’s resilience, lenders have been reducing headcount due to higher interest rates affecting the mortgage business, decreased Wall Street deal-making, and rising funding costs. Company filings reveal that the five largest U.S. banks have already cut a combined 20,000 positions this year. This comes after a hiring boom during the pandemic, which was followed by the Federal Reserve’s interest rate hikes to cool down the economy. As a result, banks found themselves overstaffed in an environment with fewer consumers seeking mortgages and corporations issuing debt or acquiring competitors.

Analysts predict that job losses in the financial industry could have an impact on the broader U.S. labor market in 2024. With the expectation of rising defaults on corporate and consumer loans, banks are preparing to make additional cuts next year. Chris Marinac, research director at Janney Montgomery Scott, explained that banks are trying to find ways to keep earnings from falling further and to allocate funds for potential loan losses.

Among the banks, Wells Fargo and Goldman Sachs have experienced the deepest cuts to their workforces. Both institutions are grappling with declines in revenue from key business areas. Wells Fargo announced a strategic shift away from the mortgage business earlier this year and has already cut approximately 5% of its workforce. Executives have also indicated that more cuts are expected in the future. Goldman Sachs, on the other hand, has “right-sized” the bank through previous rounds of layoffs. However, headcount is still expected to go down as the bank moves away from consumer finance and sells off certain businesses.

One of the factors driving these cuts is the slower job-hopping trend within the finance industry. This has left banks with a surplus of employees that they had not anticipated. While overall headcount at Bank of America has dipped this year, the firm has still hired 12,000 new employees, suggesting that many individuals have left their positions. Citigroup has also undergone significant changes, with CFO Mark Mason revealing that 7,000 job cuts have already been identified. CEO Jane Fraser’s plan to overhaul the bank’s structure and the sale of overseas retail operations will lead to further reductions in headcount.

In contrast to its peers, JPMorgan Chase has been an outlier in terms of hiring. The bank has expanded its branch network, made aggressive technology investments, and acquired First Republic. This has resulted in a 5.1% growth in headcount this year. Even with these additions, JPMorgan still has over 10,000 open positions. CEO Jamie Dimon’s leadership has allowed the bank to navigate a challenging interest rate environment, attracting deposits and growing revenue while smaller competitors have struggled. As one expert noted, other banks may experience several more quarters of declines as they look for ways to survive.