The mood is turning sour on Bay Street, the heart of Toronto's financial district.
Until now, Canadian banks have been insulated from the turbulence of the U.S. financial markets. Most avoided sub-prime mortgages and other risky investments and maintained high capital ratios, a sign of a financial institution's health. However, that's all changed and bank CEOs now openly worry the U.S. recession is drifting northward.
As their bottom lines come under pressure, banks are beginning to trim their staffs, according to Jocelyn Yacoub, principal of Yacoub & Associates Recruitment Professionals, a Toronto-based talent broker.
"This has been probably been the most aggressive laying off ... that I have seen in the past 15 years," Yacoub says, adding that the pace of job cuts has stepped up over the past couple of weeks. "The cutting of positions is at all levels. C-level positions have been at the most risk now than I have ever seen before."
Some banks, including TD Financial Group and the Canadian Imperial Bank of Commerce, have either said their hiring plans haven't changed or they plan to add staff in their securities areas. Like their U.S. counterparts, Canadian banks have also gotten government help. On Nov. 12, Canada's central government said it would buy $50 billion (Canadian) in insured mortgages as part of its plans to improve the availability of long-term credit.
Are Still Bigger Layoffs Looming?
But even with these safeguards, are jobs in the financial sector safe? In a recent blog post, Mark McQueen, chief executive of privately held specialty finance firm Wellington Financial, argues more layoffs may be on the way at investment banks.
"With Canadian investment banking revenues down between 30 and 40 percent so far this year, what's curious is that there haven't been any material layoffs on the professional side," McQueen says. "Perhaps the reason why the i-banking reductions haven't yet happened is simple: Why lay off before bonus season when you can do it just as easily in January at a far smaller nut? Given the stock market, many investment banks will be justified next month in giving their low-to-mid performers goose eggs. Not a crappy bonus with the subtext of 'find another job' as you might have seen in prior years, but no bonus at all. They are, after all, discretionary."
Yacoub disagrees with McQueen's assessment, arguing companies will not wait to get rid of an employee whom they believe is an underperformer. At the same time, opportunities exist for people who can prove that they are the "solution" to problems, she says.
"The challenge is that they are only going to hire 'A' players," Yacoub explains. "I think companies are going to change their formula in how they attract talent."
Though the job market will rebound, no one is sure how long that will take. In the mean time, the bubble seems to have burst on Bay Street. "I was out on Bay Street Wednesday night and everyone is depressed," Yacoub says.