Biggest Banks Cut 20,000 Jobs Amid High Interest Rates

Staffing levels at some of America’s biggest banks are reportedly getting smaller.

Aside from the country’s largest lender, JPMorgan Chase, the five biggest banks in the U.S. have quietly been cutting jobs all year, CNBC reported Thursday (Oct. 19.)

In all, these banks have slashed 20,000 positions in 2023, with more layoffs expected, the report said, as the finance world deals with ongoing pressure of interest rates on the mortgage sector.

“Banks are cutting costs where they can because things are really uncertain next year,” Chris Marinac, research director at Janney Montgomery Scott, told CNBC.

According to the report, cuts in the financial space could place pressure on the larger American labor market next year. And Marianc said banks are set to make even deeper cuts in 2024 as they deal with increasing defaults on corporate and consumer loans.

“They need to find levers to keep earnings from falling further and to free up money for provisions as more loans go bad,” he said. “By the time we roll into January, you’ll hear a lot of companies talking about this.”

Some companies already are saying they expect a slowdown, like Wells Fargo. The bank’s third-quarter results last week showed net charge-offs increasing, loan demand dropping and average deposits sliding.

And even though consumer spending remains strong, CEO Charles W. Scharf said the bank expects a continued slowing of the economy.

The bank’s net charge-offs rose from historic lows during the quarter, fueled by both its office portfolio and higher credit card loan balances. In response, Wells Fargo upped its allowance for credit losses to $333 million.

“Looking ahead, the U.S. economy has continued to be resilient with key support from the labor market and strength in consumer spending,” Scharf said during an earnings call. “Delinquencies have continued to deteriorate at a relatively slow consistent rate without signs of acceleration across our portfolios. Our base case remains a continued slowing of the economy, but we remain prepared for a wide range of scenarios given there is still significant uncertainty ahead.”

This week saw the release of the Federal Reserve’s Beige Book, which collects insights from businesses and banks to get a sense of the state of the economy.

Of banks in the financial hub of New York, the book said:

“Small- to medium-sized banks in the region reported lower loan demand across all loan segments, including refinancing. On balance, credit standards tightened for all loan types and loan spreads continued to narrow. Most banking contacts reported higher deposit rates. Delinquency rates edged up.”