JP Morgan Predicts "50% Drop in 3Q Fee Income"... Will It Follow Goldman Sachs in Layoffs?

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] JP Morgan, a leading Wall Street financial firm and the largest investment bank in the United States, forecasts that its fee income for the third quarter (July to September) this year will decrease by up to 50% compared to the same period last year. This is attributed to the Federal Reserve's interest rate hikes, high inflation, and recession concerns, raising fears that the decline in revenue could lead to staff reductions.

According to Bloomberg and other sources on the 13th (local time), Daniel Pinto, Co-CEO and Chief Operating Officer (COO), stated at a conference held in New York that JP Morgan's third-quarter fee income could drop by 45-50% compared to the same period last year. Last year, JP Morgan recorded its highest-ever advisory revenue in the third quarter, generating $3.3 billion (approximately 4.6 trillion KRW) in fee income.

JP Morgan's official third-quarter earnings announcement will be made on the 14th of next month. The bank expects its trading business revenue for the third quarter to increase by 5% year-over-year. Considering that this segment's revenue grew by 4% in the first half of this year compared to the previous year, the growth rate is slightly increasing. This is interpreted as benefiting from increased market volatility in stocks, commodities, and other areas, boosting trading-related revenue.

Amid the bleak outlook for fee income, some have speculated that JP Morgan might proceed with layoffs. In response, Pinto said, "We must be very cautious when reducing bankers because it can harm growth potential," adding, "The banking business offers various forms of compensation, and adjustments can be made without resorting to workforce reductions."

He further stated, "JP Morgan will make adjustments regarding how to manage its medium-term structure," and added, "In this situation, we might be able to hire highly talented bankers who were previously inaccessible or unemployable."

JP Morgan's remarks came following reports the previous day that Goldman Sachs plans to lay off hundreds of employees. The Wall Street Journal and others reported that Goldman Sachs intends to announce layoffs involving hundreds of employees as early as next week. Since the bank has resumed its annual performance reviews, which were suspended during the COVID-19 period earlier this year, the layoff targets are expected to be determined based on these reviews.