Wall Street braces for new layoffs as profits wane

Wall Street plans to get smaller this summer. Faced with weak markets and uncertainty over regulations, many of the biggest firms are preparing for deep cuts in jobs and other costs.

The cutback plans are emerging even as Wall Street firms have mostly recovered from the financial crisis and are reporting substantial profits again. But those profits are not as big as they were before the crisis, and it is expected that in the coming months it will be even more difficult for firms to make money. Worries about debt in Europe and the shape that the Dodd-Frank financial overhaul rules will ultimately take, combined with the usual summer doldrums, are prompting banks to act.

“It’s a tense environment right now,” said Glenn Schorr, an analyst with the investment bank Nomura.

Even Goldman Sachs, Wall Street’s most profitable firm, is retrenching. Senior executives at Goldman have concluded they need to cut 10 per cent, or $1 billion, of non-compensation expenses over the next 12 months, according to a person close to the matter who was not authorised to speak on the record. The big pullback will cause Goldman employees, who have already been ordered to cut costs, to re-examine every aspect of their business.

The firm, this person said, had not set final targets for layoffs, but Goldman was “certain” to shrink headcount in the coming months. Decisions on bonuses are still months away, but they are sure to come down as well if business does not pick up.

Bank of America is also examining its expenses and is likely in the next few months to cut some staff members from its securities division, according to one senior executive at that firm who was not authorised to speak on the record. And Credit Suisse is in the process of identifying people to cut in its investment banking unit, according to a person briefed on that bank’s plans.

Morgan Stanley is expected to cut at least 300 low-producing brokers in its wealth management division this year, more than the firm initially expected, and has announced plans to cut $1 billion in non-compensation expenses over the next three years. Unlike many of its rivals, however, the firm so far has no plans to cut staff members from its investment banking and trading division, which has added hundreds of employees over the last two years or so as part of a rebuilding effort after the financial crisis.

Some firms have already wielded the axe. In January, Barclays Capital cut 600 people, or more than 2 per cent of its worldwide staff, citing a business slowdown, and recently cut more employees for “performance-related reasons,” according to a person briefed on the cuts but not authorised to speak on the record. A third of the January cuts were in New York.

©2011 The New York
Times News Service