Wall Street spent the past year binging on bankers. Get ready for the Big Puke.
Whispers of hiring freezes and even layoffs have begun to circulate at financial firms as soaring interest rates and recession fears have tanked appetites for mergers, IPOs and other big corporate deals, sources told The Post.
At an industry luncheon last week with executives from top banks including JPMorgan and Morgan Stanley, chatter was dominated by speculation that layoffs will ravage the industry’s workforce by at least 10% — and that the bloodbath could be in full swing by year’s end, sources told The Post.
“The conversation was all about when people think hiring freezes will happen and when the layoffs are coming,” a source with knowledge told The Post.
It’s an about-face from last spring, when junior bankers at Goldman Sachs griped to their bosses a leaked Power Point presentation about 100-hour work weeks that they claimed were endangering their mental and physical health.
Last month, JPMorgan reportedly began laying off hundreds of bankers in its mortgage division, citing “cyclical changes.” Insiders suggest bankers focused on SPACs could next be on the chopping block in a matter of weeks.
“It’ll start with smaller layoffs at first — the kids who don’t have anything to do,” one executive told The Post.
Last year, big banks including Goldman Sachs, JPMorgan and Morgan Stanley hiked salaries for entry-level bankers to unprecedented heights, partly because of a feeding frenzy for so-called “blank check” companies, or SPACs — a new vehicle for taking companies public quickly that sparked a unprecedented deal volume last year as the pandemic waned.
But those deals have since dried up, setting the stage for job carnage, sources said. Last week, JPMorgan Chase and Morgan Stanley both reported surprisingly steep profit drops. While JPMorgan revealed its investment banking fees tanked 54% in the most recent quarter, Morgan Stanley said its equity underwriting fees were off 86%.
“Banks brag about how they manage costs in relation to revenue,” Wells Fargo banking analyst Mike Mayo told The Post. “My advice to investment bankers is don’t spend this year’s bonus in the Hamptons just yet.”
Still, banking sources predicted that most higher-ups will remain circumspect at least until summer’s end before sharpening their axes. That’s partly because they aren’t keen to burnish their ruthless reputations, and partly because some still hold out hopes that the economy could stage a rebound this fall. As such, they aren’t keen to shrink their departments’ budgets midyear.
“The next couple of months are actually a great time for underperformers,” a source said. “Banks are holding onto everyone — If they fire someone they might not get the approval to rehire anyone.”
Likewise, junior bankers’ 100-hour work weeks have in some cases shrunk to between 50 and 60 hours, according to sources. Hours devoted to community service have soared and “people have time to paint homes in Washington heights this summer,” according to a source.
Indeed, signs of anxiety about the boom’s end are growing among the rank and file. One banking source noted he is “marginally seeing more people in the office as layoffs loom.”
“Granted, there are interns,” the source said. “But I haven’t seen the elevators so full in years.”
Indeed, while as many as 90% of Wall Street interns were getting jobs at the height of the hiring frenzy, that percentage is now “materially lower,” according to one well-placed source.
“It’s the worst-kept secret that layoffs will happen,” another insider observed. “There is an entire generation that has never been through an economic downturn. It’s going to be new and painful for a lot of people.”
Another source added, “Jamie Dimon isn’t going to let people sit on the payroll not doing anything for long.”
The slowdown in dealmaking is also expected to hit white-shoe law firms focused on M&A and dealmaking.
“The days of firms having someone to get junior associates their dry-cleaning is over,” one insider quipped. “Firms are greedy and they’re super sensitive to maximizing profits.”