Morgan Stanley and Citigroup Inc. are among Wall Street firms preparing to eliminate jobs as first-half revenue dropped for a third straight year.
Headcount at Morgan Stanley will decline by about 700 in the second half, bringing total 2012 staff reductions to 4,000, Chief Financial Officer Ruth Porat, 54, said yesterday in an interview. Deutsche Bank AG, Europe’s biggest lender by assets, is considering about 1,000 job cuts at its investment bank, while Citigroup plans to chop about 350, people with knowledge of the decisions said this week.
Trading and investment-banking revenue at the five largest Wall Street firms fell 18 percent in the second quarter as deal and trading volume dropped amid concern that Greece would leave the euro and the region’s sovereign-debt crisis would spread to other nations including Spain. The decline led to questions about whether banks could cut costs to improve returns.
“All of these earnings that came out, none of them changed the fundamental problem, which is Europe is in disarray and nobody is taking risk,” Brad Hintz, a Sanford C. Bernstein & Co. analyst, said on Bloomberg Television. “You have an environment where the Street can only tighten its belt.”
Bank of America Corp., the second-biggest U.S. bank by assets, plans to trim $3 billion in annual expenses from its investment-banking, trading and wealth-management units. The Charlotte, North Carolina-based lender didn’t say how many jobs it would be eliminating.
Goldman Sachs Group Inc. plans to cut $500 million of expenses this year, mostly from compensation, after reporting the lowest first-half revenue and earnings in seven years. Chief Financial Officer David A. Viniar said the firm’s headcount would feature a greater proportion of junior employees by the end of the year.
“We’re controlling the levers that we can, which are expenses and capital,” Viniar, 57, said this week on a conference call with analysts.
The cuts announced over the past week may be a precursor to more staff reductions by banks, said analysts including Charles Peabody of Portales Partners LLC in New York.
“It’s tough to make money in this environment, and so I think there’s going to be a further round” of cuts, Peabody said in a phone interview.
Citigroup, the third-biggest U.S. bank, is planning the cuts in its securities division, which includes investment banking and trading, according to a person with knowledge of the matter. The firm previously disclosed plans to eliminate 1,200 jobs from the unit.
“We are not oblivious to the fact that our cost structure cannot be justified by our current revenue,” Chief Financial Officer John Gerspach said in January. “While much of the current difficulty reflects market conditions, we equally have some management and execution challenges.”