Banks Consider Layoffs As Short-Term Crisis Ends And Long-Term Costs Appear

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

FILE PHOTO: Homeless man sleeps in a closed branch of Chase Bank on nearly deserted Wall Street in the lower Manhattan Financial District during the coronavirus disease (COVID-19) outbreak in New York City , New York, United States, April 3, 2020. REUTERS / Mike Segar / File Photo

However, as executives brace for a prolonged recession and the accompanying loan losses, layoffs are back on the table, consultants, industry insiders and compensation analysts said.

Compared to April projections, economists and bank executives predict that the US economy will take longer to recover, with high unemployment through 2021 and near zero interest rates 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.

“There is no doubt that the layoffs (will) be widespread for all banks,” said Barry Schwartz, chief investment officer at Baskin Wealth Management in Toronto, which invests in JPMorgan Chase and other major Canadian banks.

Banks need to cut costs due to expected credit problems, along with low interest rates and regulatory pressure to cut dividends, he said.

The bank’s staff could shrink by an average of 5-10%, mostly at the middle and lower levels of the technology, human resources and finance departments, according to Alan Johnson, director of compensation consulting firm Johnson Associates, Inc.

JPMorgan Chase & Co has already cut around 100 jobs in mid-July, according to comments on social media. People who said they worked in three divisions – community and consumer banking, commercial banking, and corporate and investment banking – said they were made redundant. Representatives for JPMorgan declined to comment.

Wells Fargo & Co returned to jobs after announcing a three-month hiatus in April, he said. Affected staff have so far been in tech and retail banking, and management anticipates thousands more layoffs this year and next, sources say.

“We haven’t seen 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 of executive search firm Heidrick & Struggles.

“Things are going to get a bit worse … and we could see an increase in restructuring.”

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

A spokesperson for Standard Chartered said the job cuts are not due to the pandemic, but are part of a strategic plan more than 4 years old. Any Standard Chartered employee terminated in 2020 will receive their salary for the remainder of the year and will receive severance pay, according to a bank statement.

HSBC announced this month the restart of a plan to cut 35,000 jobs.

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

Reuters reported in May that large Wall Street banks were generally expected to cut budgets, including in areas of technology and operations, such as third-party consultants, business analysis, process management, and business centers. ‘calls.

RECORD REVENUES FROM JOB SALE

Wall Street’s trading and investment banking business generated huge revenues thanks to market volatility in March and April. But CEOs and analysts have since warned that capital market income will trend lower for the remainder of the year, despite stock indexes posting record highs recently.

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

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

“Everyone was surprised at how much more efficient you can be,” he said. “Later this year or early next year, (the managers) will look around and say we just have a lot more people than we need.”

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

Our standards:Thomson Reuters Trust Principles.

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