U.S. banks may accelerate job cuts after reducing 11,400 positions in the first five months of the year, a 21 percent increase over 2010, because of falling profits and government regulation, according to Challenger, Gray & Christmas Inc.
“Firms are under tremendous pressure,” said John Challenger, chief executive officer of the Chicago-based company that advises companies on workplace reductions. “Shareholders are bailing out of them, and their stock prices are reflecting that these businesses may not be the profit-generating entities that they once were.”
Job cuts at financial firms are climbing after falling to a 14-year low of about 24,000 announced last year, according to data compiled by Challenger. This year’s reduction “might very well” be more than double 2010’s number, CEO Challenger said today in a phone interview.
Net revenue at the six biggest U.S. banks -- Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co., Goldman Sachs Group Inc. and Morgan Stanley -- fell 13.3 percent in the first quarter from a year earlier, according to data compiled by Bloomberg. The KBW Bank Index, which tracks 23 of the biggest U.S. lenders, is down 8.8 percent so far this year.
Cuts are continuing as global regulators impose new rules on Wall Street, such as those required under the Dodd-Frank Act passed by Congress last year, Challenger said.
“You hear both sides saying jobs is the No. 1 issue in this country and in the upcoming elections, unemployment is high and yet the regulation that is going on with Dodd-Frank is going to mean fewer jobs,” he said. “The companies have no choice because they’re not going to be as profitable.”