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Massive layoffs on Wall Street fear shrinking bank profits

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Wall Street spent the past year getting drunk on bankers. Get ready for a big vomit.

Rumors of hiring freezes and even layoffs have begun to swirl in financial firms, sources told The Post, as soaring interest rates and recession fears have sapped appetite for mergers, IPOs and other big corporate deals.

At an industry lunch last week with executives from leading banks including JPMorgan and Morgan Stanley, conversations were dominated by speculation that the layoffs would devastate the industry’s workforce by at least 10% — and that the bloodbath could be in full swing by the end of the year, it said. sources. Mail.

“The conversation was about when people think the hiring freeze will happen and when layoffs are coming,” a source familiar with the matter told The Post.

That changed last spring when junior bankers at Goldman Sachs complained to their bosses about a leaked Power Point presentation on the 100-hour workweek that they claimed threatened their mental and physical health.

“Jamie Dimon won’t let people sit on the payroll for a long time and do nothing.” joked the source.
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Visit of Blackrock Chairman and CEO Larry Fink "Claman Countdown" at Fox Business Network Studios March 9, 2022
Blackrock Chairman and CEO Larry Fink attends Klaman’s Countdown at Fox Business Network Studios on March 9, 2022.
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Last month, JPMorgan reportedly began laying off hundreds of bankers in its mortgage division, citing “cyclical changes.” Insiders speculate that SPAC-focused bankers could be on the chopping block in a few weeks.

“At first, everything will start with small layoffs – children with nothing to do,” one of the leaders of The Post said.

Last year, major banks, including Goldman Sachs, JPMorgan and Morgan Stanley, raised entry-level banker salaries to unprecedented levels, in part because of the hype surrounding so-called “blank check” companies, or SPACs, a new medium for listing companies. . quickly, prompting unprecedented transaction volume last year as the pandemic subsided.

But those deals have since petered out, setting the stage for a workplace carnage, the sources say. Last week, JPMorgan Chase and Morgan Stanley reported unexpectedly sharp drops in profits. While JPMorgan said its investment banking fees fell 54% in the latest quarter, Morgan Stanley said its stock underwriting fees fell 86%.

“Banks brag about how they manage costs relative to revenue,” Wells Fargo banking analyst Mike Mayo told The Post. “My advice to investment bankers: don’t spend this year’s bonus in the Hamptons just yet.”

However, bank sources predict that most top executives will remain cautious until at least the end of the summer before sharpening their axes. That’s partly because they don’t want to polish their ruthless reputation, and partly because some still hold out hope for an economic recovery this fall. Thus, they do not tend to cut the budgets of their departments in the middle of the year.

David Solomon
Last year, junior bankers at Goldman Sachs, led by David Solomon, published a Power Point presentation on overwork.
AFP via Getty Images

“The next couple of months are actually a great time for losers,” the source said. “Banks hold on to everyone – if they fire someone, they may not get a re-employment permit.”

Similarly, according to sources, the 100-hour workweek of junior bankers has been reduced to 50-60 hours in some cases. Public service hours have increased, the source said, and “people will have time this summer to paint houses in Washington Heights.”

Indeed, there are growing signs of unease in the rank and file that the boom is over. One source at the bank noted that he is “slightly seeing more people in the office as layoffs loom.”

“Of course there are interns,” the source said. “But I haven’t seen such full elevators in years.

Indeed, while 90% of Wall Street interns were hired during the height of the hiring craze, that percentage is now “significantly lower,” according to one knowledgeable source.

“It’s the biggest secret that layoffs are going to happen,” another insider remarked. “There is a whole generation that has never experienced an economic downturn. It will be new and painful for a lot of people.”

Another source added: “Jamie Dimon is not going to let people sit on the payroll for a long time and do nothing.”

The downturn in deal-making is also expected to hit law firms specializing in M&A and deal-making.

“The days when firms had someone who hired junior employees to do their dry cleaning are over,” one insider joked. “Firms are greedy and very sensitive to profit maximization.”

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