Net Net: Promoting innovation and managing change
Net Net: Promoting innovation and managing change

Wall Street cuts its way to profitability

Financials in the spotlight

Wall Street pulled off a minor miracle of sorts this week, with most of the biggest banks matching or topping their earnings estimates.

For most banks, it came in part through head count reductions.

Citigroup, which reported earnings Friday morning, topped estimates but reduced head count by 6 percent, to 239,000. Bank of America, which announced results Thursday, saw staffing shrink about 3 percent, to 213,183. JPMorgan Chase staff shrunk 2 percent, to 237,420.

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Only Wells Fargo added staffers, growing 1 percent to 268,600.

In 2015, the number of staffers in the securities industry in New York rose to a post-crisis high of 172,400, according to a reportNew York State Comptroller Thomas P. DiNapoli released last month. And, while the numbers reported by banks stretch across the country, it's still not a good sign for Wall Street that management positions are being eliminated.

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Investment banks, which employ only a fraction of as many employees as consumer banks, will report earnings next week. Morgan Stanley reduced its fixed income staff by 25 percent late last year, and eliminated back-office positions, cutting 1,200 in the process. The bank will report earnings Monday.

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After Morgan Stanley, Goldman Sachs will report results Tuesday. Goldman will likely make further cuts this year, after eliminating an unspecified number of jobs, according to a Bloomberg report Friday.

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Job cuts at banks were expected, one analyst said, in part because Wall Street firms are still trying to confront low profitability in part stemming from continued low interest rates from the Federal Reserve.

"In an environment like this, where growth is difficult to attain, the lever you can pull is expenses," said Julie Solar, senior director at Fitch Ratings.