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July 26, 2012Investment Banks
Jobs in Investment banks are being ruthlessly cut since the beginning of 2012, as the revenues and profits of these banks disappear. Increased regulation and the economic crisis has led to decreased leverage and profits for these banks. While the first round of cuts was mainly by the European Banks faced with a huge domestic crisis, tens of thousands of Financial Jobs are being slashed by European and USA Financial Institutions.
The Financial Industry has become too huge as a percentage of the global economy with any value creation to say something like the IT industry. The share of the market cap of the stock market had become too high during the boom years of 2008 and it is continuing to go down. Despite the best (some would say the worst) efforts by the Governments to prop up the Too Big to Fail Banks, jobs are being let go as there is not enough work. European Banks are shrinking their balance sheets as they are too leveraged and insolvent. Without the ECB crutch, almost all of them would go under.
London and French Banks are selling divisions and shedding jobs to become more leaner and survive till the Government keeps them on life support. Major financial centers of London, New York are the worst hit in terms of financial job losses.
The second round of 2012 job cuts is being led by the US investment banks like Morgan Stanley and Citigroup. Many investment banking divisions are getting severely downsized or shut outright leading to mass firing. This process has been continuing right since 2008 and looks like it will go for some time more. The repeated scandals and scams like interest rate fixing, money laundering, unregulated bets have already led to billions of dollars in fines and firing of top executives like the Barclays CEO.
Investment Banking Job Carnage
Bank of America had already announced thousands of job cuts earlier. Today it cut 20% of its Asian MDs as it tries to cope with the sinking of investment banking revenues. Other investment banks like RBS, Nomura, BNP Paribas, Societe Generale are also cutting jobs with a vengeance. Goldman Sachs also announced big time salary cuts for its partners and fixed income trading.
Headcount at Morgan Stanley will decline by about 700 in the second half, bringing total 2012 staff reductions to 4,000, Chief Financial Officer Ruth Porat, 54, said yesterday in an interview. Deutsche Bank AG (DBK), Europe’s biggest lender by assets, is considering about 1,000 job cuts at its investment bank, while Citigroup plans to chop about 350, people with knowledge of the decisions said this week.
Morgan Stanley Joins Citigroup in Job-Cutting Push Amid Slump
Citigroup, the third-biggest U.S. bank, is planning the cuts in its securities division, which includes investment banking and trading, according to a person with knowledge of the matter. The firm previously disclosed plans to eliminate 1,200 jobs from the unit.