Analysts and recruiters predict that U.S. investment banks may reduce their workforce further if ongoing economic uncertainty continues to hinder dealmaking in the coming months.
U.S. President Donald Trump's threats to impose tariffs on trading partners have roiled markets, weighed on capital markets activity and raised the risk of an economic slowdown. The turmoil has taken some of the shine off Wall Street expectations that deals would pick up this year under a business-friendly administration.
Wall Street banks including JPMorgan and Bank of America have already begun annual culls targeting underperforming employees, while Goldman Sachs and Morgan Stanley are planning to lay off staff in the coming weeks.
If deals do not recover in the coming months, other major banks and boutiques will be forced to reevaluate their workforces, analysts and recruiters warned.
"There's an expectation that investment banking pickup is delayed, not dead," said Mike Mayo, a banking analyst at Wells Fargo. "But if we're having this discussion in the middle of the summer, that could be a different story. If the revenues aren't coming in, then employees bear the brunt."
Larger banks are quicker to reduce headcount, while boutiques could follow later, said Chris Connors, principal of Johnson Associates, a compensation consultant.
"If the pipeline does not materialize quickly, then they’ll make moves to reduce staffing levels," he said.
Global investment banking fees fell 6.3% to $16.83 billion in the period from Jan. 1 to March 13, versus $17.96 billion a year earlier, preliminary data from Dealogic showed. The plunge is even sharper compared with the fourth quarter, when fees reached $19.96 billion as dealmaking rebounded.
U.S. equity offerings have also slowed this year, with issuance reaching $57 billion as of March 19, sliding from about $69 billion during the same period last year.
An uncertain economic outlook has weighed on executives' confidence that their companies' stocks can perform in the critical quarters after an initial public offering, bankers said.
Bonuses at Wall Street banks rose for last year as activity rebounded, but they could be at risk for 2025, analysts said.
For example, Bank of America's bonus pool for investment bankers rose an average 10% for 2024, Reuters reported in January. Bank CEOs were also awarded pay bumps as dealmaking rebounded.
Goldman Sachs CEO David Solomon's compensation rose 26% to $39 million for last year, according to a filing.
Bank stocks have been punished as the outlook darkened. Shares of smaller investment banks have slid the most, while megabank stocks have been more resilient because the lenders benefit from more diversified revenue across trading, consumer and wealth businesses.
Shares of Evercore have slumped about 22% year-to-date and Jefferies are down 21% so far this year, compared with a 3.5% rise for JPMorgan and 1.3% for Goldman Sachs.
Bank of America, Morgan Stanley and JPMorgan declined to comment. Goldman Sachs said it does not comment on specifics in any given year, but reiterated that recent cuts were "part of its normal, annual talent management process."
Banks are likely to review their staffing after a flurry of departures and recruitment, which typically follow annual bonus payouts, recruiters said.
Firms consider "what's our current pipeline, how do we need to be staffed if we want to grow, or we're just going to be a bit leaner this year," said Brianne Sterling, head of investment banking at recruitment firm Selby Jennings.
There are still pockets of growth in areas such as private credit and technology, she said. But consumer, industrial, and building and construction sectors face a potential slowdown.
U.S. brokerage Oppenheimer warned on Wednesday it no longer expects growth in U.S. investment banking revenue this year because of the uncertainty stemming from tariffs. It had previously estimated revenue would jump 32%.
"All of the investment banks have budgeting targets," said Macrae Sykes, portfolio manager at Gabelli Funds. "To the extent that revenue will be less than anticipated, it will have implications on cost controls, whether through lower headcount or overall compensation."
