At the height of the coronavirus pandemic last spring, the heads of US 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 US 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.