Banks eye layoffs as short-term crisis ends, long-term costs emerge

By Elizabeth Dilts Marshall, Anirban Sen and Imani Moise NEW YORK (Reuters) - At the height of the coronavirus pandemic last spring, the heads of U.S.

Reuters August 29, 2020 00:06:12 IST
Banks eye layoffs as short-term crisis ends, long-term costs emerge

Banks eye layoffs as shortterm crisis ends longterm costs emerge

By Elizabeth Dilts Marshall, Anirban Sen and Imani Moise

NEW YORK (Reuters) - At the height of the coronavirus pandemic last spring, the heads of U.S. banks including Morgan Stanley , Bank of America Corp and others pledged not to cut any jobs in 2020 because it was the wrong thing to do.

However, as executives prepare for an extended recession and loan losses that come with it, layoffs are back on the table, said consultants, industry insiders and compensation analysts.

Compared with April projections, bank economists and executives expect the U.S. economy to take longer to recover, with high unemployment into 2021 and interest rates staying near zero for the foreseeable future.

On top of that, working from home has shown some managers that they need fewer employees to do the same amount of work.

"No question, layoffs (will) come across the board for all the banks," said Barry Schwartz, chief investment officer at Toronto-based Baskin Wealth Management, which invests in JPMorgan Chase and other large Canadian banks.

Banks have to cut costs because of expected credit issues, as well as low interest rates and regulatory pressure to trim dividends, he said.

Bank staff could shrink by an average of 5-10%, mainly at mid- and lower levels in technology, human resources and finance departments, according to Alan Johnson, head of the compensation consultancy Johnson Associates, Inc.

JPMorgan Chase & Co already cut around 100 jobs in mid-July, according to comments on social media. People who said they worked in three divisions – the community and consumer bank, the commercial bank and the corporate and investment bank – said they were let go. JPMorgan representatives declined to comment.

Wells Fargo & Co resumed cutting jobs in August after putting layoffs on hold in March. The affected staff have so far been in technology and retail banking, and management is planning thousands more layoffs this year and next, sources said.

"We didn't see a lot of restructuring or layoffs with the banks (earlier in the pandemic). We're starting to see it now," said Dennis Baden, partner-in-charge at executive search firm Heidrick & Struggles.

"Things will get a little bit worse ... and we might see an increase in restructuring."

Among global banks, Standard Chartered PLC and HSBC Holdings PLC have let go of several hundred employees this year. Standard Chartered plans to lay off a few hundred more this year and early next year, according to bank sources.

A Standard Chartered spokesman said the job cuts are not due to the pandemic, but are part of a more than 4-year-old strategic plan. Any Standard Chartered employees let go in 2020 will be paid their salary for the rest of the year and will receive severance pay, according to a bank statement.

HSBC announced this month it was restarting a plan to cut 35,000 jobs.

The Bank of Nova Scotia also let go of some U.S. investment bank staff, according to several sources familiar with the development. The bank declined to comment.

Reuters reported in May that large Wall Street banks were widely expected to cut budgets, including areas in technology and operations, like third-party consultants, business analytics, process management and call centers.


Wall Street's trading and investment banking businesses generated huge revenue from the market volatility in March and April. But CEOs and analysts have since cautioned that capital-markets revenue will trend downwards for the rest of the year, despite market indexes posting record highs recently.

Analysts still expect banks to report decent profits in coming quarters, and some may continue to invest in core businesses in an opportunistic way. For instance, JPMorgan Chase opened 13 new branches in July, after having closed 22 branches in June on a net basis, according to S&P Global.

Still, banks are planning staff cuts because costs are expected to be high relative to revenue, and management teams have found that remote work setups function better than expected, said Johnson.

"Everyone has been surprised by how much more efficient you can be," he said. "Later this year or early next year, (managers will) look around and say we just have many more people than we need."

(Corrects paragraph 9 to say that Wells Fargo "resumed cutting jobs in August" after a pause in March, instead of "outlining a three-month pause in April")

(Reporting by Elizabeth Dilts Marshall, Anirban Sen, Imani Moise; Editing by Lauren LaCapra and Richard Chang)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:


also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.