J.P. Morgan Chase & Co. (NYSE: JPM) announced it will cut 4,000 part-time jobs and another 13,000 contract positions in its mortgage business. The bank blamed weaknesses in the mortgage market and new federal regulation for the action. Other banks face similar problems, so cuts across the industry are likely not over.
Some of the big cuts in the industry already have happened. Bank of America Corp. (NYSE: BAC) announced in September 2011 it would eliminate 30,000 jobs between then and 2015. The savings, the bank said, would total $5 billion. Rumors are persistent that other large U.S. financial firms will make cuts of a smaller magnitude this year, as trading profits shrink and consumer banking becomes more competitive and less profitable.
As bank earnings for the fourth quarter showed, the financial services recovery that was spectacular in 2011 has stalled. CEO Vikram Pandit was ousted from Citigroup Inc. (NYSE: C) in September of last year, allegedly in part because he was not aggressive enough in cutting costs. New CEO Michael O’Neill said he would fire 11,000. Investment banks such as Goldman Sachs Group Inc. (NYSE: GS) and Morgan Stanley (NYSE: MS) will need to “right size” to keep margins at what Wall St. views as acceptable levels.
Among Bank of America, Citigroup and J.P. Morgan, announced layoffs have reached 58,000.
Banks continue to face the issues of bad debt and bloated payrolls, although the problems are not as severe as two years ago. The nation’s largest banks are the ones that have announced the most massive layoffs. But in the tier below them are another 20 or 30 banks. Their job cuts are not carefully watched by the national media, but they have happened and probably will continue to nevertheless. Only recently, BMO Financial and State Street Corp. (NYSE: STT) reported tough quarters. And foreign banks with large U.S. operations have related problems, although much of the trouble rests with challenges in their home markets.
Bank layoffs are not over. In fact, they may accelerate.
Douglas A. McIntyre