Morning Coffee: Morgan Stanley’s job cuts are like Goldman’s and BoA’s. The Citi executive without the big pay

Another small cloud floats over the horizon for bankers in 2025.  Morgan Stanley has announced the first RIF of Ted Pick’s time as CEO.  It will be a reduction of about 2,000 heads, and (since the 15,000 advisors in the Wealth Management division are not within the scope of the plans), that means a little bit more than 3% of its investment banking staff are going.

Get Morning Coffee ☕ in your inbox. Sign up here.

It’s a familiar pattern – Goldman Sachs announced something similar at the start of the month, and Bank of America has been making cuts too. All the big US banks have a similar issue, which is that they went into 2025 expecting a deal boom which hasn’t happened.  They are all somewhat overstaffed for current conditions. 

This does not mean they have given up on the boom, though. Morgan Stanley is still “adding real headcount” at senior levels in the perpetual expectation of a capital markets recovery. If anything, they're slightly understaffed for the conditions they expect later in the year.  Profits are volatile, but market shares are very stable – nobody wants to get caught out when the market turns and lose clients because they can’t execute. 

Banks are therefore in a situation that economists might call “labour hoarding”; tolerating excessive costs in the short term in order to preserve the franchise in the long term. But as the short term drags on and on, the cost builds up.

Normally, you would deal with this sort of situation with a hiring freeze.  Rather than the pain and expense of making people redundant, banks often prefer to let natural attrition do the work, just delaying the replacement of employees as they leave. Bank of America tried this during COVID, with some success.  

This year, however, nobody’s going.   Goldman, BoA and now Morgan Stanley have all noted that turnover is very low indeed. The fewer people leave, the more risk averse they become. No banks is taking any chances on speculative hires.

Which means that banks are left trying to persuade people (particularly in mid-office roles) to move to less expensive locations. Goldman Sachs is doing it. And now Morgan Stanley is too. - Bloomberg says some of the coming 2,000 cuts will be related to where the bank bases its workers.  

So it’s going to be a stressful year for junior bankers, one way or another.  Either they will be looking over their shoulder for the next rounds of redundancies, or the boom will arrive and they’ll be overworked to previously unimaginable levels. Welcome to 2025.

Elsewhere, sometimes what regulatory filings don’t tell you is just as interesting as what they do.  For example, in a bank’s annual proxy statement, they have to disclose the compensation paid to the CEO, the CFO and the three highest-paid other executives.  Looking through Citigroup’s latest proxy, we can see that this disclosure covers Vis Raghavan, Andrew Morton and Andy Sieg. 

Last year, however, the disclosures also included Anand “Selva” Selvakesari, the Chief Operating Officer. It seems that he has dropped out of the podium positions.

This isn’t exactly unexpected, of course – the filing also notes that the “Transformation Bonus Program”, which includes 250 top executives, only paid out 68% of its maximum amount for 2024, compared to 80% and 94% in the previous two years.  And that’s despite a significant boost to the payout reflecting Citi’s stronger share price performance.

The burden of the smaller transformation bonus is likely to have fallen disproportionately on Selva, as the transformation bonus package was meant to be linked to progress on improving risk controls and mending the regulatory relationship.  It hasn’t exactly been a great year for that sort of thing, and it seems like a can has been duly carried.  However, there’s always tomorrow, and the tech transformation has apparently started 2025 pretty strongly.  Perhaps Selva will be back among the medals next time.

Meanwhile …

Speaking of lower-cost locations, JPMorgan’s largest single US office is the tech campus in Columbus Ohio. And it’s apparently having a few challenges with the global return-to-office, particularly with parking. According to one exasperated techie, “The last thing that I want to do after a full day of work is stand with a group of my coworkers, hope there is enough room on the next bus and ride for 10 minutes to my car parked at the mall”.(Business Insider)

Olympus Peak Management might be called a “Perry Cub” – it was founded by an alumnis of Perry Capital. But now it’s appointed Richard Perry, who has returned to hedge fund life at the age of 70, as one of its partners. (Bloomberg)

Some people are getting disgruntled at Brian Moynihan for not having a better relationship with President Trump. (NY Post)

The Morgan Stanley DEI program stepped up substantially 2020 around the time of Black Lives Matter, and according to many employees, seems to have been stronger on enthusiasm than execution.  Both Black and White staff are suing the company for discrimination in various different cases, people kept getting signed up for leadership courses they hadn’t asked for, and a recruiting outreach program ended up uncovering significant pay gaps.  (WSJ)

UBS has decided to close down its outsourced trading operation (which helps short-staffed or small hedge funds execute their orders), which was previously one of the biggest on the Street.  Ian Power, who was recruited to be head of the business a few weeks ago, will be leaving as the execution hub pivots toward wealth management clients. (TheTrade)

A new documentary film about Dimensional Fund Advisors and the birth of the index fund industry was shown to “a packed theatre in New York’s SoHo neighbourhood, which included several notable faces”, but how will it play in Peoria? (Institutional Investor)

Have a confidential story, tip, or comment you’d like to share? Contact: +44 7537 182250 (SMS, Whatsapp or voicemail). Telegram: @SarahButcher. Click here to fill in our anonymous form, or email editortips@efinancialcareers.com. Signal also available.

Bear with us if you leave a comment at the bottom of this article: all our comments are moderated by human beings. Sometimes these humans might be asleep, or away from their desks, so it may take a while for your comment to appear. Eventually it will – unless it’s offensive or libellous (in which case it won’t.) Eventually it will – unless it’s offensive or libellous (in which case it won’t.) 

Photo by Robby McCullough on Unsplash