Niea Milwaukee 2009 Again

Layoffs Hit Wall Street As Financial Needs Change

Posted by TerranceV | Business | Posted on January 31st, 2012

Story By: by Charlie Herman

The biggest hits in the broader financial services sector came in the period from 2007 to 2009 as the mortgage crisis unfolded. Here, a chart shows total employment over the past decade:

Source: Bureau of Labor Statistics

Credit: Stephanie d’Otreppe/NPR

“And that’s why you’re seeing the banks respond to the present environment with layoffs, branch closures, etc.,” she says. “We just don’t need them anymore; it’s that simple.”

A Climate Of Caution

There have been fewer big corporate deals, and doing those deals brings in a lot of money for banks. There’s also been a drop in company stock and bond offerings that generate big fees.

“If you’ve got a business which is built around trading and investing banking, you’ve got a problem, because you are not generating the types of earnings that you would like,” says bank analyst Dick Bove with Rochdale Securities.

There are also new rules limiting, for example, the fees banks can charge retailers for debit card transactions. Those have been cut in half.

Banks used to make big profits trading with their own money, and that’s now being curtailed by regulators who say it’s too risky. Regulators are also requiring banks to put more money aside in case of future financial downturns. That might make them safer, but it means Wall Street firms have less money to invest or lend.

Then there’s the general climate of caution.

“People don’t want to take risks because they are uncertain about the future,” says Paul Miller, a bank analyst at FBR Capital Markets. He cites fears about Europe’s debt crisis as a top reason for Wall Street’s falling profits.

“Until people get more bullish on the future, it’s going to be very difficult for Wall Street to make money and they will continue to shed employees. They will continue to cut people’s pay,” Miller says.

Notable Layoffs Announced In 2011

Bank of America: 36,000

Citigroup: 4,500

Wells Fargo: 1,900

Morgan Stanley: 1,600

Synovus Financial Corp.: 1,150

Goldman Sachs: 1,000

Source: Challenger, Gray & Christmas Inc.

Smaller Bonuses, Relatively Speaking

For those still employed, year-end bonuses being handed out now are expected to be as much as 30 percent lower compared with a year ago.

“Last year there was this generalized groaning about payouts being down, about their bonuses being down,” Bush says. “This year? Not a peep … People left on Wall Street are very much thinking, ‘You know what? It’s good that I have a job.’ “

Smaller bonuses may please critics of Wall Street, but to put things into perspective, average salaries for these workers last year (not including bonuses) was more than $360,000. And top executives and the biggest deal makers will continue to earn millions.

“Wall Street tends to go through these paroxysms of, you know, growth and contraction,” she says. “This is different. This is the financial services industry looking at its prospects, I think, over a long period of years.”

The outlook in the years ahead is for a smaller, more stable and less profitable industry.