U.S., European Investment Banks May Make Cuts as Revenues Decline

Following declining revenues in their advisory and underwriting divisions, investment banks in the U.S. and Europe may cut jobs and bonuses, according to financial analytics and information company S&P Global.

Bankers on these teams may lose anywhere between 20% to 45% in pay in 2022, independent compensation firm Johnson Associates Inc. reported.

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As huge business volumes drove M&A and initial public offering revenues to record highs in 2021, banks hired employees at a rapid clip. But with Russia’s invasion of Ukraine in early 2022 and interest rate hikes across major Western economies, hiring has subsided. U.S. and European bank revenues have decreased in 2022, with the third quarter showing the weakest returns. The average decline at the 12 leading global investment firms was nearly 49% year-over-year, according to S&P Global Market Intelligence data.

The losses could indicate job cuts in 2023, Michael Turner, Head of CIB analytics at research firm Coalition Greenwich, told S&P Global, adding that total investment banking revenue per employee dropped from about $2 million to $1.5 million during the first nine months of 2022. Though advisory and underwriting revenues are expected to bounce back in 2023, Turner said that banks will still need to slash jobs.

Citigroup, Barclays, Goldman Sachs, and Morgan Stanley have cut investment banking jobs, according to a November 8 Bloomberg News report. Meanwhile, Credit Suisse plans to lay off about 900 client-facing investment bankers amid a wider group overhaul, Financial News London reported.

The first three quarters of 2022 marked the slowest period for global equity capital markets since 2003 and the largest year-over-year percentage drop in M&A activity since 2009, financial market data company Refinitiv said. Investment bank revenues followed, dropping to their lowest levels since 2019.

As for 2023, "I would be surprised [if] the first quarter is good there," UBS Chief Executive Officer Ralph Hamers said in an October earnings call.