Dark clouds gather on Wall Street: fewer revenues will mean fewer employees
Since 2019, five of the biggest Wall Street bankers increased their staff by 10% in total. Some have boosted their ranks even by 30%, like in the case of Morgan Stanley.
While the number of those who are bringing the money in remained the same, revenues increased steadily.
Front desk investment bankers brought in around $4.2 million per person in 2021, compared with under $3 million before the pandemic.
Overall income has risen by 40% for the 12 biggest firms since the end of 2019.
Now, things are slowly going downhill for money makers, so adjusting costs will most definitely mean that job cuts will be made.
In 2016, Morgan Stanley boss James Gorman said that employees on Wall Street were optimally numbered.
That statement was made after axing one-quarter of his firm’s bond traders. Now, the two years of euphoria on the markets come to an end.
Revenue for investment bank Jefferies Financial decreased by 32% year-on-year for its fiscal Q2.
At JPMorgan, investment banking chief Daniel Pinto has warned that deal-related fees could fall 50% in the three months to the end of September.
Those 18,000 new staff that Morgan Stanley added since the end of 2019 now feel the jitters.
Goldman Sachs has a surplus of 8,700 compared to the same year while JPMorgan’s corporate and investment banking division has expanded by around 13,000 people.
If not producing for the front desk what are all those extra people doing?
Many of them are software engineers, hired to make banks more flexible and increase customer loyalty.
Goldman has been staffing up its consumer bank, Marcus. JPMorgan moved some payments staff into its investment banking unit in 2020.
These people don’t directly bring money in, but they carry costs.
When it bought online broker E*Trade and asset manager Eaton Vance, Morgan Stanley hired around 6,000 people.
The result is a coming quandary. Banks have more mouths to feed out of what’s fast becoming a smaller trough.