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The recovery that never came.

Banks' results explain why big job cuts are coming

If anyone is still laboring under the illusion that banks won't be making a massive reduction in force (RiF) in the coming weeks and months, today's results from JPMorgan, Bank of America and Citi should enlighten them. Cuts are definitely coming. And there is good reason for them to be large. 

March 2022 is a long time ago now, but when the war in Ukraine began and investment banking revenues first plummeted, layoffs began to be mentioned. At that time, the verdict was that it was best to wait - after spending 2021 building up their investment banking divisions in the face of talent shortages, banks didn't want to immediately cut them back. Revenues might return; deals might be done again.

Today's results show that revenues kept on falling right through Q4. In investment banking divisions (M&A and capital markets) the decline persisted. It was huge and it was strangely uniform between banks. For all the positive statements from senior Goldman Sachs bankers about a deal revival in 2023, there was no sign of a comeback. 

Banks now have little choice but to at least semi-rightsize to the new revenue environment.

They're also left with a difficult conundrum when it comes to bonuses. Macro traders had an exceptional Q4. Citi said today that its revenues from rates and currencies trading in the quarter were up 63% on the previous year; Bank of America said they were up nearly 40%. Even after cutting investment bankers, banks may need to pay many of those who remain zero bonuses for 2022 if they're to have any hope of preventing people on their macro desks leaving from hedge funds.

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AUTHORSarah Butcher Global Editor

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