Wall Street can expect to see hundreds, if not thousands, more layoffs in the coming years.
A handful of U.S. and European investment banks this year have already announced thousands of personnel cuts across their organizations, with many companies taking aim at their trading businesses in particular. The looming headcount reductions mark the latest sign that banks are still adjusting to their new roles in the trading markets they once ruled but that are now dominated by leaner, technology-reliant electronic-trading firms.
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The world's leading dozen investment banks — including Goldman Sachs Group Inc., Citigroup Inc. and Barclays PLC — have collectively cut more than 6,000 jobs across their equities, fixed-income and investment-banking divisions since midyear 2014, according to data from Coalition, a CRISIL Ltd.-owned business intelligence company. S&P Global Inc., the parent company of S&P Global Market Intelligence, is a majority stakeholder in CRISIL.
Approximately 1,500 of those layoffs came in the 12 months leading up to June 30. There could be still more, though, as the companies wrestle with how to respond to weaker trading revenue.
"They're all under a lot of pressure," said Marty Mosby, director of bank and equity strategies at Vining Sparks, in an interview.
Investment banks have been navigating increasingly rough terrain in the trading business for the better part of a decade, particularly in equities, where post-financial crisis reforms prohibited banks from certain trading practices that were deemed too risky. Now, with compressing interest rates and slowing M&A activity, the outlook has become even more muted.
The top 12 global investment banks generated $76.8 billion in revenues across their equities, fixed-income and investment-banking businesses during the first half of 2019, according to Coalition. That figure represented the slowest start to a year since 2006. Along with Goldman, Citigroup and Barclays, the Coalition report aggregated data from Deutsche Bank AG, UBS Group AG, JPMorgan Chase & Co., Morgan Stanley, Société Générale SA, HSBC Holdings PLC, BNP Paribas SA, Credit Suisse Group AG and Bank of America Merrill Lynch.
To combat those pressures, larger investment banks have found themselves at a crossroads when evaluating how to change their stock trading divisions.
Some institutions have opted to retool their equities desks to better fit a more electronic marketplace, by building out internal technologies and slimming down their staff sizes.
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Goldman, for instance, is currently hiring more than 100 coders to work in its storied trading division. Those positions will work on either Marquee, an institutional client-focused trading and risk management platform, or Atlas, the company's electronic trading platform, a spokesperson for the bank said. On balance, the firm has grown in size. Between the second quarters of 2017 and 2019, the full-time employee count across the entire Goldman organization grew 4.4%, according to S&P Global Market Intelligence data.
"[Trading] has been turned from an art into more of a science," Vining Sparks' Mosby said.
Yet, on the other end of the spectrum, at least one major investment bank has decided to move away from the stock-trading business entirely.
Deutsche Bank revealed in July that it was undergoing a massive restructuring, through which it would exit global equities trading and slim down its fixed-income trading operation. The German lender, as a result, plans to cut 18,000 jobs across its entire organization. As of July 24, Deutsche Bank had already let go of more than 900 employees.
Equities have always been a difficult business for banks and other trading companies to turn a profit on, industry experts said. But, as a result of the regulations rolled out after the 2008 crisis, such as the Volcker rule in the U.S., banks have been barred from certain trading practices, forcing them to rethink their roles in the stock market. Today, investment banks need to command a sizable market share or a unique niche to be able to effectively compete in equity trading, according to Sandler O'Neill analyst Jeff Harte.
"It's kind of like a barbell," Harte said in an interview. "If you're not in the top five but also don't have a defendable niche, it's tough to maintain profitability if you're in that middle ground. I would think we'd see more [cuts] coming on the equity side."



