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Although rising interest rates traditionally boost the banking sector’s revenues and profits, the current year, which recorded the highest interest rates, was not a happy year for banks in general and for the large investment banks in particular, as the global banking sector witnessed delisting in 2023 of more than 60,000 jobs and layoffs, in what is considered the worst year of job losses in the industry since the 2008-2009 global financial crisis.
In doing so, the banking sector halted the employment trend it had started with the recovery from the coronavirus epidemic crisis, according to data analysis in a detailed report by the Financial Times.
According to the analysis, investment banks are at the forefront of job cuts aimed at cutting costs and maintaining profit margins, as they have suffered a fall in demand for their investment and advisory services for the second time this year and a decline in the number of deals they arrange and initial offerings of shares.
In addition, some of the crises that the sector has experienced have caused banks to resort to the largest item that allows them to reduce their expenses and thus maintain the profit margin, leading to a decrease in employment, such as The collapse of Credit Suisse and its takeover by UBS led to the elimination of at least 13,000 jobs that the merger will create in the bank and expects the bank to see further job cuts next year.
Large investment banks
According to the method used in the newspaper’s report to calculate the size of the layoffs, the number could be even higher because the report relied on official disclosures from large banks without including small banks or cutting a small number of jobs.
According to the data, the 20 largest global banks have cut 61,905 jobs this year, compared to about 140,000 jobs that the same banks cut during the financial crisis between 2007 and 2008.
If the previous waves of job cuts in 2015 and 2019 were the result of banks’ inability to deal with near-zero interest rates, then this year’s cuts come while interest rates are at their highest levels in decades.
The previous two layoffs focused on European banks that were unable to profit from lending.
This year, the banks that have laid off the most workers are large investment banks like Wall Street banks, which are suffering from a lack of demand for their services due to rising interest rates.
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However, the largest workforce cuts remain at UBS – Credit Suisse, which has already laid off 13,000 employees, bringing its headcount to 116,000.
UBS boss Sergio Ermotti noted that “next year 2024 will be crucial for the mergers and acquisitions process,” at a time when analysts expect we will see more job cuts and layoffs in the coming months.
The second largest bank in terms of the number of layoffs is Wells Fargo, which announced this month that it would reduce the number of its employees worldwide by 12,000 and increase its headcount to 230,000. Laying off around seven thousand employees recently cost the bank $186 million, as the investment bank’s CEO announced that he had allocated up to a billion dollars for the cost of laying off workers, meaning tens of thousands could also lose their jobs.
Further reduction
Meanwhile, the major Wall Street banks have cut a total of 30,000 jobs this year, including five thousand jobs at Citigroup, four thousand eight hundred jobs at Morgan Stanley, four thousand jobs at Bank of America, three thousand,200 jobs at Goldman Sachs and a thousand jobs at JP Morgan Chase.
According to the Coalition Greenwich Group, major investment banks reduced their workforce by four percent in the first half of this year and then made further reductions in the second half of the year.
As demand for investment banking services remains weak, particularly when arranging deals or IPOs, banks will be forced to further reduce spending through job cuts and layoffs.
Meanwhile, Lee Thacker, owner and director of financial broking firm Silvermine Partners, said: “There is no stability, no investment and no growth in most banks, so there will likely be more job cuts.”
There are still major banks that have not announced job cuts this year, notably HSBC and Commerzbank, after making a series of layoffs in recent years.
According to Coalition Greenwich, employment prospects in the future sector may not improve next year, but the approach of laying off workers that has been prevalent this year is expected to continue in 2024.
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