The six largest U.S. banks saw their combined head count dip about 0.1% in the second quarter as they compete for deposits and look toward a continued lift in the deal making Wall Street has seen in recent weeks.
Staffing levels are often seen as a sign of health for capital raising and for the economy in general and are also closely watched by people in the banking business with friends or colleagues who have been affected by the financial-services job market.
Following about six quarters of slowed deal making in investment banking, the current uptick in activity may continue through the rest of the year.
“It definitely feels better over the course of the last six to eight weeks than it felt earlier in the year,” Goldman Sachs Group Inc. CEO David Solomon said on the bank’s quarterly conference call on July. “When you have a big reset, it takes five or six quarters to get that reset. It’s not surprising that we’re at six quarters now and you’re starting to see more activity.”
As of June 30, the total head count at JPMorgan Chase & Co.
JPM,
Bank of America Corp.
BAC,
Wells Fargo & Co.
WFC,
Citigroup Inc.
C,
Morgan Stanley
MS,
and Goldman Sachs
GS,
stood at 1,116,218. down 1,384 from the end of the first quarter, when the total was 1,117,602.
Four out of six major Wall Street banks reduced head count in the quarter ending June 30.
Terrence Horan/MarketWatch
In the previous quarter, banks reduced their head count by 0.2%, including a 3,100-job cut by Goldman Sachs.
Bank layoffs have been plentiful in recent months, as Silicon Valley Bank, Signature Bank and First Republic all went out of business and were then purchased by First Citizens Bancshares Inc.
FCNCA,
New York Community Bancorp Inc.
NYCB,
and JPMorgan Chase, respectively. Some bank employees were hired by other banks during the turmoil.
In the biggest transaction among distressed banks globally, UBS Group AG
UBS,
acquired Credit Suisse in a $3.2 billion rescue deal and then announced plans to lay off 35,000 people, some of whom were then hired by Deutsche Bank AG
DBK,
Wells Fargo and Jefferies Financial Group
JEF,
among others. Many of those layoffs are taking place in Credit Suisse’s U.S. investment-banking unit.
None of the six major U.S. banks announced plans for any major head-count reductions for the balance of the year.
However, Wells Fargo said on its quarterly conference call with analysts on July 14 that it’s forecasting a further reduction in staffing levels. It did not provide any specifics, but its staffing has come down by 10,000 in the past year to 234,000 as the bank pared back its mortgage-lending business and made other cuts.
“We continue to believe that there are opportunities to drive efficiency throughout the company,” Wells Fargo CEO Charlie Scharf said on the call.
During the second quarter, Morgan Stanley confirmed plans to shed 5% of its workforce, or about 3,000 bankers, by the end of June, but so far those numbers have not been reflected in its head-count figures.
A source familiar with the bank said that Morgan Stanley had completed the job cuts but that many of the workers were still technically employees as of June 30 because of various departure dates, severance packages and vacation-time considerations.
JPMorgan Chase added 3,189 jobs as the largest positive contributor to head count in the second quarter, while Wells Fargo reduced its head count by 2,000, the largest drop in the quarter.
JPMorgan Chase CFO Jeremy Barnum told MarketWatch on a call with reporters that the bank expects to see some head-count growth this year.
“The head count for the rest of the year is reflecting the consequences of our investment strategy of adding bankers and branches and technology investments,” Barnum said. “As attrition normalizes, we’re running lean in some pockets. … You might see a little growth.”
Goldman Sachs CEO Solomon said that the bank has no further plans for head-count reductions but that it will reintroduce performance reviews that sometimes result in job cuts.
“We’ll watch the trajectory of revenues and the environment as we go forward,” Solomon said. “We’ll always make adjustments if something changes. … We’re operating in extraordinarily low activities of investment banking. We’re not going to erode that franchise.”
Along with job cuts and the turmoil in regional banks, higher interest rates and rising costs of deposits persisted as major themes as banks look toward the second half of the year.
Profits were mostly down in the second quarter compared with year-ago levels, and banks saw pressure on their net interest income, which is the difference between the interest they pay for deposits and the interest they’re paid on loans.
“The weaker [second-quarter] results reflect rising deposit costs, an uptick in provisions and continued inflationary pressure on non-interest expenses,” said analysts at debt-research company Fitch Ratings. “Bank performance should continue at similar levels through the remainder of the year, as further rises in funding and credit costs are offset by modest recovery in fee income and better controlled costs.”
For regional banks, pressure on deposits and rising costs are expected to continue.
Huntington Bancshares Inc.
HBAN,
CFO Zach Wasserman told MarketWatch the bank hired 10 bankers from Signature Bank and managed to grow its deposit base even as other banks saw deposits drop. It’s also being conservative about holding liquid cash given the turbulence in the market, he said, but, like other banks, it’s been exposed to the higher costs of deposits.
“Deposits are leaving banks,” Wasserman said. “That’s what’s causing pressure on the entire banking sector.”
And even if customers migrate to a product with higher interest rates, such as a money-market account, but they stay with the bank, they’re coming on at a higher cost, which weighs on margins, he said.
“The industry has to manage through it,” Wasserman said.
And read: JPMorgan Chase, Wells Fargo, Citi beat earnings targets, but uncertainty clouds the economic outlook
And: Bank of America’s stock rises after second-quarter earnings and revenue beat expectations
This post was originally published on Market Watch
