Wall St jobs: popping asset bubble triggers cull of the mild

Just a year ago, Wall Street banks were busy boosting pay and perks to appease junior bankers. These days, they are debating how many to let go.

Goldman Sachs is preparing for a round of job cuts that could come as soon as next week. JPMorgan retrenched hundreds of employees in its mortgage division in June.

Bank investors will be pleased. They have been griping about profligate pay. This ran up sharply last year.

Pity the poor department head, however well-remunerated. They furnish the C-suite with the scalps of the redundant at the opportunity cost represented by understaffing when markets and dealmaking rallies.

But they are in a weak position to resist cost cutting and they know it. There is a dearth of investment banking activity. Last year’s slew of initial public offerings and listings by special purpose acquisition companies is a distant memory.

JPMorgan, Bank of America, Citigroup, Goldman Sachs and Morgan Stanley collectively took in $19.1bn of revenue from their investment banks during the first six months of 2022, a 32 per cent drop from the prior year period.

Yet headcount at JPMorgan’s corporate and investment bank, is, for example, up 17 per cent compared to 2019. That works out to a net addition of over 10,000 positions.

Compensation consultant Johnson Associates expects investment bankers to see the biggest year-on-year decline in bonuses paid out across the financial industry this year. These are projected to fall by as much as 45 per cent on the underwriting side and as much as 25 per cent for advisory work. Trading desks and macro and quant-focused hedge funds are the only two groups that can expect a bump-up in bonuses.

Job losses and pay cuts are simply aspects of the deflated feeling that ensues when a big asset bubble pops. Bankers say the coronavirus pandemic, meanwhile, encouraged them to hang on to underperformers deficient in killer instincts. Wall Street is poised to release them back into the wilds of the jobs market. Kindness, much talked about in the wake of lockdowns, now seems a little old hat.

The Lex team is interested in hearing more from readers. Please tell us what you think in of the US banking jobs market in the comments section below.