Global investment banks are throwing tens of thousands of jobs as falling interest rates, weak trade volumes and marches for automation create a brutal summer for the sector.
Nearly 30,000 layoffs have been announced since April in banks, including HSBC, Barclays, Société Générale, Citigroup and Deutsche Bank. Most of the cuts have come in Europe, and Deutsche accounts for more than half of the total, while trading tables have been hit hardest.
In New York City, commodity and securities jobs fell by 2 percent in June from a year earlier, a loss of about 2,800 jobs, according to the New York Department of Labor.
Bank executives are under pressure from investors to cut costs and protect profits. Since long-term US interest rates began to fall in November, the KBW index for US bank stocks has fallen 5 percent, while the S&P 500 has risen by 6 percent. The Stoxx index, which tracks European banks, has lost 1
Although the reasons given vary from bank to bank, there are indications that deeper trends, such as the growing pile of debt that is paying off interest rates, are forcing the sector to shrink.
"Clearly, the outlook for investment bank earnings is getting tougher," said Andrew Lowe, a Berenberg banking analyst. "It's hard to make money as an investment bank in a zero or negative interest rate environment."
Automated trading, passive investment strategies, and volume consolidation by the major players have drained much of the profits from stock trading and many kinds of futures.
Automation also breaks into more complex derivatives, commodities and bond trading. In 2018, the total revenue of the ten dozen global banks fell from fixed income, currency and commodity trading to 2006 levels, according to Coalition, a banking research firm.
Investment banks "are facing a structural change in their income profile," said Ed Firth of Keefe, Bruyette & Woods. "[banks] that will win will have volume, systems and computer power. How many people do you need?"
The banks are also abandoning the so-called "Basel IV" rules, which will increase banks' capital requirements, with effect in 2022. The increased capital required will make trading less profitable for many banks.
At banks that have formally announced cuts to date, layoffs make up about 6 percent of the total workforce.
Earlier this month, Barclays said it had cut 3,000 jobs , or almost 4 percent of the total workforce in the second quarter.
Days later, HSBC announced that nearly 5,000, primarily senior employees, would leave, citing "an increasingly complex and challenging global environment" characterized by falling US interest rates , trade conflict and Brexit uncertainty.
Citigroup said last month that it would cut "hundreds of" jobs in the marketplace. A person close to the case described layoffs ne as a "function of market dynamics."
The latest cuts raise the 18,000 job losses in Deutsche, which announced a radical overhaul last month that would reduce the number of employees of Germany's largest lender by nearly a fifth. Apart from eliminating stock trading, these changes will cut deep into the currency and bond tables.
In April, when the Société Générale announced that it would be wasting 1,600 jobs, mostly investment banking positions, it said it was sticking to "areas of strength".