Giant international financial institutions are preparing to slash thousands more banking and trading jobs to control expenses amid higher regulatory capital requirements, lower profits and weaker global economic growth. Banks have been pushed to pad their bottom line by dipping into their loan loss reserves instead of generating actually organic growth.
Wall Street firms have been cutting headcounts since the second half of 2011 as the elevated European sovereign debt crisis weighed on client activity.
As of June 30, the six largest U.S. financial firms by assets had cut over 18,000 jobs in the past year, or 1.6 percent of the total, according to an analysis by The Wall Street Journal.
Bank of America Corp (NYSE: BAC), Citigroup Inc. (NYSE: C), Wells Fargo & Company (NYSE: WFC), Goldman Sachs Group, Inc. (NYSE: GS) and Morgan Stanley (NYSE: MS) together have eliminated over 30,000 positions since June 2011.
Only JPMorgan Chase & Co. (NYSE: JPM) expanded its workforce in the past year, adding 12,787 jobs due in part to efforts to clean up its troubled mortgage operations.
And more cuts are coming down the pipe.
The latest example is Morgan Stanley, which said Thursday it expects to cut more than 4,000 jobs by year's end from the firm's global headcount of 61,899 at Dec. 31.
On Wednesday, Goldman Sachs said it will seek $500 million in additional cost reductions this year after first-half revenue fell to the lowest since 2005. On the same day, Bank of America came out with its announcement to trim $3 billion in annual expenses from investment banking, trading and wealth-management units.
Across the pond the story is similar with Deutsche Bank AG (NYSE:DB), Europe's largest bank by assets, mulling 1,000 job cuts as investment banking revenue suffers, Bloomberg reports.
For those fortunate enough to keep their job, the payout likely won't be as sweet as in years past. Moreover, claw-back announcements have also been dominating recent headlines.
JPMorgan Chase will take back compensation from employees responsible for trading losses that it said have so far totaled $5.8 billion, executives said on July 13. The claw-backs would equal about twice the employees' annual compensation.
In February, UBS AG (NYSE: UBS), Switzerland's largest lender by assets, announced plans to take back pay of those involved in a rogue trading scandal that lead to $2 billion in losses for the bank last year.
In the same month, London-based Lloyds Banking Group PLC (NYSE: LYG) said it will claw back at least 1.5 million pounds ($2.36 million) from five former and current executives and eight other senior managers, to penalize them for 3.2 billion pounds of losses the bailed-out bank incurred after the bonuses were awarded.
It seems as if the bad news never stops and the entire banking industry is stuck in a downward spiral.
Here's a list of the latest belt-tightening announcements and earnings results from a handful of the major players.
Morgan Stanley -- The sixth-largest U.S. bank by assets said during a conference call with analysts that the securities firm's headcount at year-end will fall 7 percent from 2011, reflecting previously announced layoffs as well as firm's efforts in applying a very high bar for replacing natural attrition.
The forecast implies a reduction of more than 4,000 jobs from the firm's global headcount of 61,899 at Dec. 31.
Last winter, Morgan Stanley announced 1,600 job cuts spread across its businesses, which was its largest such cutback since late 2008 and early 2009. The firm completed roughly 4 percent to 5 percent of those cuts in January and will complete another 2 percent to 3 percent by the end of 2012, a spokeswoman told MarketWatch.
The New York-based company reported a 50 percent drop in earnings on Thursday.
Second-quarter profit was $591 million, or 29 cents a share, compared with $1.19 billion, or a loss of 38 cents, a year earlier, Morgan Stanley said in a statement. Excluding accounting adjustments, profit was 16 cents a share, below the 40-cent average estimate of analysts surveyed by Reuters.
Revenue dropped to $6.95 billion from $9.21 billion a year earlier.
Compensation and benefits fell 21 percent from the year-earlier quarter to $3.63 billion, or 52 percent of the firm's overall revenue.
Shares of Morgan Stanley (NYSE: MS) fell 5 percent to $13.29 apiece in Thursday's late afternoon trading. The stock has fallen more than 12 percent year-to-date.
Credit Suisse -- The Swiss bank which is have a particularly rough time lately, is handing out pink slips to another 138 employees in the New York region starting in August, the third round of layoffs it has made this year.
The cuts, mentioned in a filing Wednesday with New York State's Department of Labor, are part of Credit Suisse's announcement last year that it would eliminate about 3,500 jobs worldwide and $2.1 billion of annual costs by the end of 2013.
The filing did not mention the level of seniority or the business areas in which the layoffs will occur, but attributed the cause to economic reasons.
Credit Suisse employed about 11,700 people in the U.S., Canada and other parts of the Americas as of Dec. 31 2011.
The new round of layoffs followed an announcement that Switzerland's second-biggest bank will cut an additional 1 billion francs ($1.02 billion) in costs by the end of 2013 after cutting 2 billion francs in costs by mid-year 2012, Credit Suisse said in a statement.
The Zurich-based bank reported better-than-expected second-quarter earnings Wednesday.
Net income rose 2.6 percent to 788 million francs from 768 million francs in the same quarter of 2011.
American depository receipts of Credit Suisse Group AG (NYSE: CS) fell 4.36 percent, to $17.55 in Thursday's late afternoon trading.
Deutsche Bank -- German daily Handelsblatt reported Thursday that Deutsche Bank will announce plans to cut around 1,000 jobs with its quarterly earnings report July 31.
Senior bankers and the back office are likely to be affected by the job cuts and the bank doesn't want to reduce personnel in Germany, two people familiar with the matter told Dow Jones Newswires.
Deutsche Bank had 14,672 employees in the corporate and investment bank unit at the end of March, down from 15,186 at the end of 2011.
Shares of Deutsche Bank AG (NYSE: DB) fell 0.16 percent, to $31.48 in Thursday's late afternoon trading.
Bank of America - The second-largest bank by assets in the U.S. continues to prune its franchise.
Bank of America has trailed rivals in recovering from the financial crisis, largely because of huge losses and lawsuits tied to its 2008 acquisition of subprime mortgage lender Countrywide Financial.
Under Brian Moynihan, who took over as Chief Executive Officer in 2010, the bank has been selling off non-core business units to improve its capital position under international Basel III regulations and improve top-line growth. So far, the Charlotte, N.C.-based bank has sold more than $50 billion in assets, reducing that figure by some 2 percent.
Bank of America has eliminated over 12,000 positions in the last year, leaving it with a workforce of 275,460 as of June 30. That is the fewest since 2008, when the bank had 243,000 employees.
A new round of cuts announced Wednesday would cut costs by $3 billion annually in its investment-banking, commercial-banking and wealth-management units by 2015.
The bank didn't disclose a specific target for job cuts in the latest round of the plan known as Project New BAC, though executives did say that the new wave of cuts would yield fewer job losses than the first round.
After announcing a loss of 90 cents a share in last year's second quarter, the bank showed a profit of 19 cents a share for the second quarter of this year, topping analysts' estimate of 14 cents per share.
Revenue at Bank of America totaled $21.97 billion in the second quarter, down from $22.28 billion in the first quarter but up from $13.24 billion a year earlier when it took mortgage charges.
Shares of Bank of America Corp (NYSE: BAC) lost 3.05 percent, to $7.3 apiece in Thursday's late afternoon trading.
Goldman Sachs - The New York-based company announced Wednesday additional job culling that it said will affect some high-ranking employees.
Goldman said it aims to save $500 million this year on top of $1.4 billion of reductions since last spring, in large part by keeping younger, cheaper workers at the expense of older, costlier ones.
The firm slashed 1,000 jobs in the first six months of 2012 and reduced pay costs 14 percent to $7.29 billion. As of June 30, the firm had 32,300 employees.
On Tuesday, Goldman said its second-quarter profit fell 12 percent to $927 million, or $1.78 a share. While that was a technical surprise for the bank, topping analysts forecast of $1.16 a share, the figure was still below the $1.85 a share Goldman reported in the second quarter of 2011.
Goldman's results on other important measures were also disappointing. Its return on equity, a common measure of profitability, was half of what it was in the first quarter. Meanwhile, the firm's revenue as a whole fell 9 percent from a year ago, to $6.63 billion.
Shares of Goldman Sachs Group, Inc. (NYSE: GS) closed 1.56 percent lower, to $95 apiece in Thursday's trading.
Citigroup - The third-largest U.S. bank is on pace to cut about 350 additional jobs this year from the securities division, Bloomberg reports Thursday, citing a person with knowledge of the matter. The reduction equals about 2 percent of the unit's staff.
About 2,000 jobs have been shed so far this year after Citigroup said in January that it would eliminate 5,000 positions over the next few quarters to save $600 million, according to the Wall Street Journal.
Citigroup reported second-quarter earnings on Monday that topped forecasts even as revenue fell short of estimates. The reduction helped Citigroup to lower second-quarter compensation costs by 8 percent from a year ago, to $6.13 billion
The bank reported a 12 percent decline in net income to $2.9 billion, or 95 cents a share. Excluding special items, earnings per share came in at $1. Analysts had expected Citi to earn 89 cents a share.
Citigroup's revenue came in at $18.6 billion in the second quarter, down 10 percent from the year-ago period and falling short of the $18.8 billion analysts had expected.
Shares of Citigroup Inc. (NYSE: C) fell 1.88 percent, to $26.59 in Thursday's trading.
Wells Fargo - The most valuable U.S. bank and largest home lender said on July 13 that it would miss a target of reducing quarterly non-interest expense to $11.25 billion in the fourth quarter. That figure was $12.5 billion in the fourth quarter of 2011.
Net income advanced to a record $4.62 billion, or 82 cents a share, from $3.95 billion, or 70 cents, a year earlier, the San Francisco-based company said in a statement on July 13.
However, current expenses are still too high and we expect them to trend down over the remainder of the year from second quarter levels, said Wells Fargo Chairman and Chief Executive John Stumpf, during the second-quarter earnings conference call. No specific job reduction plans were disclosed.
Shares of Wells Fargo & Company (NYSE: WFC) rose 0.56 percent, to $34.15 in Thursday's trading.