Amidst the Covid-19 outbreak, this distress is a consequence of Wall Street’s excessively ambitious growth approach. In the initial two quarters of this year, there have been accounts indicating that prominent American financial organizations have spent more than a billion dollars on severance payments. It is not an inexpensive undertaking, even though downsizing might result in long-term savings.

This year, Goldman has laid off approximately 3,400 employees, which accounts for roughly 7% of its entire staff. The bank revealed that it had spent $260 million on severance-related costs in the first half of the year. On Wednesday, Goldman Sachs, heavily affected by a decline in trading and investment banking, became the most recent major bank to announce a financial setback as a result of recent staff reductions.

The bank announced job cuts of 5,000 in the previous month. Citigroup declared that it had spent an additional $450 million on severance pay last week. Morgan Stanley had revealed earlier in the day that it had paid over $300 million for staff layoffs, including nearly $80 million to wealth management employees. Morgan Stanley has already terminated about 3,000 of its employees this year.

Michael Karp, a prominent recruitment specialist from Options Group, told The Financial Times that many larger firms are likely to recruit two employees and dismiss one in the remainder of the year. He predicted that this adjustment in the investment banking workforce is probable.

Several Wall Street companies now admit that their workforce expanded excessively during the pandemic in order to keep up with the surge in activities such as deal-making and trading, which affected the efficiency of working remotely.

In recent years, the biggest companies on Wall Street have together reported more than 11,000 job cuts. The cyclical nature of investment banking, even so, has seen a remarkably rapid transition from a period of growth to a period of decline.

There is a division among executives regarding whether additional workforce reductions and subsequent severance packages will be necessary as the year progresses.

“Yeshaya, the CFO of Morgan Stanley, informed analysts that plans and deals are anticipated to benefit from a backlog this week, in order to enhance our reach and effectively capitalize on the opportunity.”

However, Goldman’s CEO, David Solomon, stated that while there were no concrete plans for workforce reduction at present, the bank would initiate another round of performance-based layoffs, which had been reinstated last year but paused during the pandemic. Conversely,

“Citi CEO Jane Fraser stated to analysts last week that by implementing a more efficient organizational structure, our focus will be on continuing to decrease our expenses as we progress through the second half of the year. Citi has suggested the possibility of future workforce reductions.”

During the pandemic, Wells Fargo, among the few banks that did not experience growth, partially faced violations of regulatory asset limits and legal compliance. The bank expects the decline to persist, and it has informed investors accordingly.

Although the bank did not disclose the exact costs incurred already, most of the layoffs are attributed to this hike. Wells Fargo, based in San Francisco, has forecasted an expense increase of $800mn for this year, leaning more towards consumer banking and deals than trading.

Bank of America announced in the second quarter that it had cut 4,000 positions, which accounts for approximately 2% of its overall staff. By mainly depending on natural attrition, BofA managed to avoid significant severance payouts.

In July, the staff members from First Republic, the lender based in California that it purchased in May, officially became part of JPMorgan. This does not encompass the staff members from First Republic. JPMorgan Chase, the largest bank in the country in terms of assets, with extensive operations in retail, investment banking, and trading, distinguished itself by expanding its workforce by 8% to 300,000 in the second quarter.

Job cuts in the first half of the year.

Bank of America four thousand.

Citigroup 5,000.

Goldman Sachs 3,400.

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