In a year marked by rapid changes in the macroeconomic and financial environment, the global banking industry has faced significant challenges. According to data, the sector has seen over 60,000 layoffs throughout the year, marking the largest scale of job cuts since the financial crisis.
Analysts have pointed out that the massive layoffs can be attributed to several factors. High-interest rate environments have increased operational costs, and there has been a significant reduction in banking mergers, acquisitions, and financing activities. The continuous slump in Initial Public Offerings (IPOs) has led to a consistent decline in profits. Another key reason for the layoffs might be the decreased frequency of job-hopping among financial professionals this year, leading to a surplus of staff beyond company expectations.
Data indicates that the world's 20 largest banks have laid off at least 61,905 people in 2023, with U.S. banks accounting for half of these layoffs due to the pressure of significant interest rate hikes by the Federal Reserve.
The bankruptcy of Silicon Valley Bank became a symbolic event for the global banking industry this year. The merger of Credit Suisse and UBS alone resulted in at least 13,000 job cuts, with further significant layoffs expected in the coming year.
Lee Thacker, an analyst at financial services recruitment firm Silvermine Partners, emphasized the lack of stability and growth momentum in the banking sector, predicting further layoffs as a major trend.
Will the Layoff Wave Continue Next Year? Among the six major banks, including JPMorgan Chase, Citigroup, Bank of America, Morgan Stanley, Wells Fargo, and Goldman Sachs, only JPMorgan Chase has seen a 5.1% increase in staff numbers this year, while Citigroup remained unchanged. The other four banks have seen reductions of 1.9%, 2.1%, 4.7%, and 5.4%, respectively.
Analysts at Janney Montgomery Scott, a U.S. financial services firm, stated that banks are cutting costs as much as possible due to greater market uncertainty next year. The layoffs in the financial sector might also put more pressure on the U.S. labor market in 2024, as there could be an increase in consumer and corporate loan defaults, prompting banks to further reduce expenses.
Banks must find ways to prevent further profit declines while preparing sufficient funds for bad debts caused by loan defaults. Many companies are expected to discuss this issue in January.
UBS leads the layoffs among major banks, with a report in November stating that it cut 13,000 jobs in 2023, bringing its total workforce to 116,000. Wells Fargo follows closely, with 12,000 layoffs and a total workforce of 230,000. In just the third quarter, Wells Fargo spent $186 million on severance payments.
Wells Fargo continues to cut costs, with CFO Mike Santomassimo indicating that layoffs are not over yet, and only a small portion of the business will be unaffected:
We still have more room for layoffs. The current low voluntary departure rate means the company may need to pay more severance in 2024.
Additionally, Wall Street investment banks, including Citigroup, Morgan Stanley, Bank of America, Goldman Sachs, and JPMorgan Chase, have laid off a total of 30,000 people.
Due to a slowdown in investment banking business, Morgan Stanley has already cut 2% of its workforce this year. James Gorman, CEO of Morgan Stanley, previously stated that the current low voluntary departure rate is "a problem we need to address."
Since the beginning of 2023, Goldman Sachs has seen a significant slowdown in its investment banking business and losses in consumer banking. Affected by consumer business and real estate investment write-downs, Goldman Sachs has laid off about 3,200 people since January, accounting for 6.5% of its workforce. In May, about 250 people were laid off, and in June, directors and executives were informed that "more painful measures" were coming to cut costs.
In terms of layoff percentages, the UK's Metro Bank has made the largest cuts, with 20% of its total workforce laid off. Metro Bank aims to save £50 million annually in personnel costs and plans to further lay off 800 people.
However, some banks, such as HSBC and Commerzbank, did not lay off staff in 2023, likely because they had already conducted large-scale layoffs previously.
Some believe that 2024 will be a continuation of the story from 2023, with major investment banks becoming "more conservative."
