The pain caused by extreme market volatility at the end of 2018 appears to be rearing its head through the first two months of the year. The number of traders and brokers at four of the five big U.S. banks fell through the first seven weeks of the year, with only J.P. Morgan adding headcount across its securities business in New York.
As you can see in the chart below, Goldman Sachs, Morgan Stanley, Citi and Bank of America Merrill Lynch all employ fewer Finra-registered staff in New York than they did at the beginning of the year. J.P Morgan broke from the mold by adding a net six “brokers” over the first two months of 2019. This comes on the heels of a record-setting 2018 where the five big U.S. investment banks combined to book over $100 billion in profit for the first time ever. But choppy markets led to an uneven fourth quarter, where every bank struggled in fixed income trading while only Morgan Stanley failed to make significant gains in equities trading revenue.
It should come as little surprise then that Morgan Stanley saw the biggest drop in Finra-registered brokers over the last two months. They’ve cut securities headcount by a net 33 employees in New York City, according to official records. Fixed income trading revenues were down 30% year-on-year at Morgan Stanley during Q4 while equities revenue was flat. The bank was outperformed by its four biggest rivals across both businesses. “It’s not surprising,” one New York headhunter said of decrease. “They still had a great year, but when you miss like [the bank did in the fourth quarter], changes will come.”
Meanwhile, Goldman, Citi and BofA each saw its Finra-registered headcount in New York decrease by at least double digits. The numbers will likely continue to slowly dwindle as banks are reinvesting their 2018 profits in trading technology rather than trading talent. Goldman Sachs is said to be making cuts to its commodities trading business and is making an even bigger push into electronic trading. While J.P. Morgan added a modest number of traders and brokers through the first two months, it seemed to do much of its hiring at the very beginning of the year; headcount in New York fell by 15 in February, according to Finra.
U.S. banks combined to generate well over $230 billion in profit in 2018, an all-time record. Meanwhile, the two dozen biggest U.S. firms eliminated nearly 4,300 jobs last year. Imagine what may happen during a down year and without $21 billion in tax savings?
(Data compares number of Finra-registered “brokers” in New York on Jan. 2 to Feb. 22)