Wall Street seems schizophrenic lately.
Today’s news is a perfect example. We are seeing amazingly positive news such as since election eve, the share price of Goldman Sachs stock has rallied 40%. Investors contently contend that the combination of lighter regulations, tax cuts, higher interest rates, and a boost to fiscal spending will help the banks increase revenue and profitability. In response to this view, the big US based banks have realized a mind-boggling collective paper gain of $280 billion in market value.
Now we suddenly jerk to problems. Swiss-based bank Credit Suisse announced plans to cut 6,5000 jobs in 2017 (on top of last year’s 7,250 job reduction) after realizing a $2.4 billion loss. Credit Suisse Chief Executive, Tidjane Thiam, is continuing with a major restructuring to raise capital and increase profitability.
Most people believe that if you work for Goldman Sachs you are golden and flush with money. That is not always the case. Goldman announced today that the bank did not pay 2016 bonuses to about 100 investment bankers. The bankers, who advise on takeovers and underwrite securities offerings, are traditionally viewed as upper echelon and well compensated. The big donuts given to these guys is a clear sign that they should probably move on. Interestingly, this comes on the heels of reports that Goldman is hiring an army of tech geeks to develop artificial software and computer codes to do the tasks that junior bankers are (were) involved with.
Back to good news, at least for two people, as Jamie Dimon and Lloyd Blankfein are $418 million richer than last year. Based upon well timed stock purchases, in Jamie Dimon’s case, along with lavish stock option grants, coupled with the tremendous run-up in bank stock prices yielded both CEOs an amazing fortune.
Even with bank stocks rocking and a renewed excitement over lessening regulations, most Wall Street firms are not hiring.
Traders have been fired in droves over the last few years for a number of reasons including the ascendance of electronic trading. Although trading is booming at both the U.S. and European banks, traders are not being invited back to the party. Cost-conscious banks are uncertain whether the revival will last.
In the past number of years banks have primarily concentrated hiring in a few select areas such as Compliance and technology. It looks like it may whittle down to one; technology.
I notice in my own recruiting practice that, similar to the trading area, companies are dragging their feet with respect to hiring, unsure of what will happen to regulations. Just as bank management feels that electronic trading may negate the need to re-hire real live human traders, they also believe that if Trump significantly cuts regulations and degrades, demoralizes, and monetarily starves the regulatory agencies, it won’t be necessary to keep hiring Compliance or even keep the large number of Compliance people around.
We will continually keep you posted to new developments during these tumultuous times.