This year, making deals has been slow on Wall Street, and it doesn’t look like that will change soon.
Daniel Pinto, president and chief operating officer of JPMorgan Chase, said at a conference on Tuesday that investment banking revenue is expected to drop by 45 to 50 percent compared to the third quarter of 2017.
During the third quarter of 2016, the bank made $3.3 billion from investment banking. This was due to a bull market for IPOs, stock sales, and other transactions.
After the worst first half of the year for stocks since 1970, Wall Street is now dealing with sharp drops in capital markets activity. This is because IPOs have slowed to a crawl and mergers are happening less often. This year, the bankers’ bull market has turned into a bust, and companies are likely to cut pay and jobs in the coming months.
Goldman Sachs was the first big Wall Street firm to say yesterday that it would be cutting hundreds of jobs this month.
When asked if JPMorgan would do the same, Pinto said, “Over time,” meaning that the bank would change how many employees it has to match the opportunities in global investment banking.
2020 vision
He said that this was about how much the industry made in 2020.
Pinto said that the total amount of investment banking fees went from about $79 billion in 2019, before the pandemic, to $95 billion in 2020 and $123 billion in 2018. The fee pool is expected to go down to $69 billion in 2022, but Pinto thinks it will go back up to where it was in 2020.
He said that JPMorgan could change its cost structure by cutting jobs and lowering employee bonuses.
Pinto said, “Variable pay is an important part of the banking industry.” “You can make changes not only by letting people go, but also by cutting costs.”
Still, he said, managers “need to be very careful when there is a bit of a downturn” so they don’t make too many cuts, which will hurt the business when sales pick up again.
Still, business has given this year a welcome boost.
JPMorgan predicted that its markets revenue would rise by 5% compared to the previous year. This was because strong activity in trading fixed income would make up for lower revenue from trading stocks. The division brought in $6.27 billion in revenue the year before. – CNBC
