By Jack Barnett
Wall Street banks are laying off workers to offset the damage inflicted on their finances by a slowing global economy.
US lender Morgan Stanley yesterday became the latest firm to announce redundancies, shedding two per cent, or around 1,600, of its workforce.
Goldman Sachs earlier this year also slashed staff and its chief executive, David Solomon, warned yesterday the investment banking titan will need to be more “cautious” with its finances going forward in a likely nod to more job cuts.
European bank Credit Suisse in its latest results said it is ditching 9,000 workers, although that decision was driven by attempting to turnaround years underperformance.
Deal making, which has been a key source of revenue for investment banks over the past decade, has slumped due to firms exercising greater caution as economic storm clouds gather.
Central banks have been forced to pivot from running ultra-loose monetary policy since the financial crisis to this year hiking interest rates rapidly.
While there are now signs in the US and Europe tightening cycles are curbing inflation, the cost of borrowing is much more expensive, putting firms off taking on debt to fund mergers.
That deal making slowdown has knocked investment banks’ finances. The likes of Goldman, Morgan Stanley and JP Morgan advise companies involved in tie up talks and shepherd public listings, which have also slumped this year.
The US Federal Reserve has lifted rates quicker than other central banks, which has boosted American banks’ earnings by allowing them to charge borrowers more.
US tech giants have also been laying off workers, due to a combination of slowing advertising revenue and a collapse in their shares.
London-listed lenders have yet to launch sweeping job cuts, but that could soon change.
The UK is headed for an at least year-long recession fuelled by a reduction in spending in response to inflation eroding living standards.
Consumers are hesitant to take on more debt over fears they could be laid off, squeezing a bulky revenue stream for Britain’s high street lenders. Latest Bank of England data revealed credit card spending climbed just £400m in October.
Most of the UK’s lenders ditched their investment banking operations after the financial crisis, meaning they are less exposed to financial market slumps compared to their cross-Atlantic peers.
Morgan Stanley has been contacted for comment.
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