The investment banking industry has seen major layoffs in recent months as firms look to cut costs amid a downturn in dealmaking. Major banks like Goldman Sachs, Morgan Stanley and Citigroup have cut thousands of jobs across divisions, with some planning further reductions in 2023. The layoffs follow a hiring boom during the pandemic when banks saw record revenues from trading, IPOs and advisory work. Now, with central banks hiking rates, geopolitical tensions and recession risks, the environment has turned hostile, leading to a collapse in capital markets activity. Investment banks are preparing for leaner times by cutting discretionary spending and lowering headcounts. While trading desks have held up well so far, other capital-intensive businesses like M&A advisory and underwriting have slowed sharply. The downturn has impacted both front office and support staff, especially in developed markets like the US and Europe.
Goldman Sachs cuts thousands of jobs across divisions
Goldman Sachs has cut thousands of jobs across its global workforce, impacting all divisions. After an initial round of layoffs in September, the bank is now planning another round that could affect up to 8% of staff – around 4,000 roles. The cuts have impacted investment bankers, back-office staff, consumer bankers as well as underperformers. The bank has also paused intake of investment banking analysts. Goldman cited deteriorating macro conditions and the need to tighten expenses. The layoffs aim to protect bonus pools for remaining staff. Goldman’s headcount grew significantly during the boom years as it pushed into consumer banking, but revenues have since collapsed.
Morgan Stanley trims workforce amid deals slowdown
Morgan Stanley is cutting about 2% of its global workforce, or around 1,600 jobs, in response to the steep slowdown in investment banking. The bank’s institutional securities business which includes investment banking has suffered from the freeze in IPOs, debt issuance and M&A activity. Advisory teams have been impacted across the US and Europe. Morgan Stanley will also not be replacing some employees who depart voluntarily. The move aligns staffing with business activity as the bank expects conditions to remain challenging in the near term. Morgan Stanley had added significant headcount during the dealmaking boom and is now adjusting for the downturn.
Citigroup makes modest job cuts in slower environment
Citigroup has made selective job cuts across its investment banking division amid a broad slowdown in capital markets activity. The reductions have so far totaled less than 5% of investment bank staff and were focused on equity and debt capital markets teams. The bank is reducing headcount gradually through a combination of attrition and targeted layoffs. While still hiring in some businesses, Citigroup is being prudent on costs given the uncertain macro outlook. The cuts follow a hiring binge during the pandemic that expanded Citi’s investment bank workforce by around 40%. The bank is nowparing back some of those additions to align with deal volumes.
European banks trim Investment bankers as fees dry up
European investment banks like Credit Suisse, Barclays and Deutsche Bank have made targeted job cuts in their capital markets and advisory businesses in recent months. Credit Suisse cut or reassigned dozens of dealmakers in November as part of a revamp by CEO Ulrich Koerner. Barclays eliminated around 150 positions in its UK and US investment banking teams amid a slump in equity issuance. Deutsche Bank also cut staff in origination and advisory. The reductions reflect declining revenues in equity and debt underwriting as well as M&A advisory as clients hold off on deals in the uncertain environment. Banks are aligning staffing levels to reduced business volumes to protect profitability.
Major investment banks have cut thousands of jobs in recent months to reduce expenses amid a downturn in capital markets activity. Banks hired aggressively during the pandemic deal boom and are now right-sizing staff counts as revenues decline, especially in investment banking. While trading has held up better, advisory and underwriting businesses have been hit hard by the market slowdown. More layoffs are likely in 2023 if conditions remain challenging.