This is why banks are considering more job cuts
While associates are grumbling about their bonuses for last year, some banks are already contemplating the sort of actions that might make this a good moment to practice the art of gratitude based on the ancient banking mantra of "at least I have a job."
Bloomberg is reporting that Bank of America, which previously said that it wouldn't be cutting jobs but would instead be holding back on all but essential recruitment, is now thinking of cutting up to 200 bankers globally. The bank isn't commenting, but we understand that the discussions are at a preliminary stage and that the cuts could be a lot fewer than the 200 suggested. Widespread RiFs are still not on the cards at BofA.
Nonetheless, if even Bank of America - whose bankers had a comparatively good 2022 - is now considering taking action, something must be up.
That thing is shown in the charts below, which contain data from Dealogic. It's not just that 2023 investment banking revenues year-to-date are bad compared to 2022; overall they're also not great compared to 2018, 2019, 2020 and 2021 too. After holding off on layoffs all last year - and then regretting it (according to David Solomon at Goldman Sachs), the temptation will be to pull the trigger on more job cuts sooner rather than later.
This is the gratitude-mantra version of events. However, as 2023 unfolds things might not turn out to be so bad. The hope is that after horribly muted dealmaking from Q2 2022 onwards (the Q1 comparison in the charts below is pre-the Ukraine war), both corporates and sponsors will unleash a wave of pent-up deal making in the second half of 2023.
Associates who still want to grumble about their bonuses and to feel secure in their jobs, can focus on Morgan Stanley's 2023 outlook for M&A. There, US M&A co-heads Tom Miles and Brian Healy outline the bullish case for banking revenues this year: that corporates are well-capitalized and will make core acquisitions; that financial sponsors have plenty of dry powder; that shareholder activism is hotting up; and that cross-border M&A is in the grips of a revival. 🤞 🤞 🤞 🤞 🤞
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