By Manya Saini
(Reuters) -Wall Street banks will adjust to a more sluggish economic environment by laying off staff even as they compete to retain and recruit top talent, Kenneth Jacobs, Chief Executive Officer of Lazard Ltd, told investors at a conference on Wednesday.
Bank profits have come under pressure this year as deals dried up and markets were roiled by the Federal Reserve raising interest rates.
“Reality is starting to set in,” said Jacobs, who was speaking generally about job cuts reported across the financial industry.
His comments, made at the Goldman Sachs U.S. Financial Services Conference echo those of banking executives on Tuesday who were bracing for a worsening economy next year as inflation threatens consumer demand.
Morgan Stanley cut about 2% of its workforce, a source familiar with the situation said on Tuesday. That translates to about 1,600 employees. Rivals Goldman Sachs Group Inc and Citigroup Inc have also culled some staff.
Elsewhere on Wall Street, BlackRock Inc, the world’s largest asset manager, has also frozen hiring except in critical roles.
As the economic outlook worsened, big U.S. lenders set aside more rainy-day funds to prepare for loan defaults, according to their third quarter earnings. Results for the fourth quarter will be released next month.
“When I talk to our clients, they sound extremely cautious,” Goldman Sachs CEO David Solomon told investors Tuesday.
Bank of America CEO Brian Moynihan cited the bank’s research forecasting “negative growth” in the first part of 2023, but said the contraction will be “mild.” The company can reshape its headcount quickly through turnover and eliminating open positions, he added.
(Reporting by Manya Saini and Noor Zainab Hussain in Bengaluru; Additional reporting by Lananh Nguyen in New York; Editing by Krishna Chandra Eluri, Lananh Nguyen and Anna Driver)
