By Hadassa Kalatizadeh
The financial industry has enjoyed success and profits despite all the uncertainty and the Coronavirus pandemic. Unfortunately, however, this will not stop banks from cutting staff.
Last week the state comptroller’s office announced that pretax profits at Wall Street firms jumped by 82% during the first half of 2020, up to $27.6 billion. As reported by Crain’s NY, the impressive gains were the effect of the federal government’s involvement in taking aggressive steps to salvage markets for the second time in 12 years. Despite the good news, the comptroller’s office said that Wall Street firms are bracing to cut a total of 7,300 jobs this year, undoing almost half the gains since 2013. Even though Wall Street jobs account for not even 5 percent of the jobs in the city, they also represent 20 percent of private-sector wages. This shedding could therefore make a significant impression on NYC’s already difficult financial situation.
In October, financial services firm Cantor Fitzgerald notified the state Department of Labor that 55 members of its staff be getting a pink-slip. Alliance Bernstein similarly said it would be dismissing 31 employees in its Manhattan office. Santander Bank said it will let go 37 employees. So how do experts explain this seeming conundrum of both profits and layoffs in Wall Street?
As per Crain’s, the Federal Reserve’s rescue methods, which included cutting interest rates to zero, helped keep the markets from crashing and helped banking giants like Goldman Sachs and JPMorgan make hefty profits. The same steps, however, also worked to hurt small commercial banks by forcing them to charge less interest for mortgages and auto loans, wounding their revenues. The outlook for these small commercial banks is expected to remain bleak for a long time, as the Fed has said the rates will hover at these lows for years.
“There’s difficulty across the industry,” said Joe Abruzzo, head of commercial banking at Santander. “That requires all banks take a hard look at their biggest cost, which is people.” The banks are restructuring to have less people do the same job, with the help of technology. The Covid-19 pandemic, of course also shares some blame in dipping into firm’s profits. Even with the reopening, banks are struggling with higher costs associated with extra cleaning trying to ensure that no one is infected. “There’s a lot of testing involved,” the chief financial officer of New York Community Bancorp, Thomas Cangemi, said l. “So there’s expenses to get reopened.”
