Top executives at JPMorgan Chase (JPM) and Citigroup (C) said Friday they anticipate a tougher business climate through the end of 2023 and a slowdown in core Wall Street operations.
“There will be a recession at some point, but I don’t see a crisis right now,” said JPMorgan chief executive Daniel Pinto, who expects the Federal Reserve to raise interest rates. interest up to 5.5% before pausing.
“It’s just a slowdown in the business cycle to deal with inflation.”
Pinto, speaking at a conference in New York, predicted that JPMorgan’s investment banking fees for the full year would be 7% lower than last year. He is also CEO of JPMorgan’s corporate and investment banking.
Citigroup CEO Jane Fraser, speaking at the same conference, also played down expectations for her bank’s markets division in the second quarter. She noted that it generated $5.2 billion in revenue in the second quarter of 2022 and “I’ll probably regret it at the end of the second quarter of this year.”
Pinto and Fraser became the latest of several major bank executives this week to warn of weakness on Wall Street after a tough start to the year.
Most major banks advising on mergers or IPO underwriting reported lower fee income in the first quarter. The largest drop of 26% belonged to Goldman Sachs (GS), followed by a 25% drop at Citigroup and a 20% drop at Bank of America (BAC). JPMorgan reported a 19% decline in investment banking revenue.
Many of these banks have moved to eliminate more positions this year, according to media reports. Cuts at Morgan Stanley (MS) will amount to about 3,000, and JPMorgan is cutting about 500 positions. Citigroup and Bank of America are making more modest cuts of a few hundred jobs each.
Goldman Sachs Chief Operating Officer John Waldron said Thursday the bank is planning a total of $1 billion in spending cuts, including further layoffs. Bank of America CEO Brian Moynihan said his bank’s investment banking fees were flat, although it gained market share.
“The good news is that it’s not moving much. It’s just kind of overstepping that level,” said Moynihan, who pointed out that the bank was able to keep employee cuts low by redeploying workers to other areas for the bank. .
Fraser made it clear on Friday that Citigroup was becoming more conservative by taming its spending in a strategy known as “bending the cost curve.”
For example, he has worked over the past two years to break out of 13 different consumer markets, including China, India, Korea, Poland, Russia and Taiwan. He added Mexico in January 2022.
Another part of the strategy is to go public with Banamex, its consumer bank in Mexico. He halted a plan to sell the unit, which is Mexico’s fourth largest bank.
“I think it became pretty clear to us that the right path for our shareholders was to go the dual path, the IPO path, and we made that decision,” Fraser told about Banamex’s IPO. “We have to move on.”
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