Wall Street is facing layoffs and pay cuts amid market slowdown

Yahoo Finance's Alexandra Semenova discusses how the slowing market is beginning to hit banks and Wall Street firms.

Video transcript

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AKIKO FUJITA: Layoffs and pay cuts loom over Wall Street amid a bear market. And IPO issuance is plunging 95% this year. Let's bring in Yahoo Finance's Alexandra Semenova, here with me at the desk. I guess this is kind of inevitable. In some ways, we've already started to hear that commentary about job cuts from many companies.

ALEXANDRA SEMENOVA: Yeah, absolutely. I mean, we're seeing announcements every day, it seems, from companies laying off workers or curbing hiring. But so far, this has been concentrated in real estate and technology. And Wall Street appears to be the next sector to see this. This is something that the industry is largely preparing for, especially after we just saw second quarter bank earnings roll in.

Although many banks did report results that were better than Wall Street estimated, revenue was still down across the board. We saw a tremendous decline in deal making activity amid the war in Ukraine and overall market volatility that has weighed on banks' bottom lines, making it inevitable that some forms of cost cutting are going to come. And obviously, they're going to come in the form of reducing bonuses and getting rid of some workers.

On the bonus front, a new report from the compensation consulting firm Johnson Associates estimates that bankers who underwrite debt and equity are expected to see their incentive pay plunge 45%, while those in M&A could see bonuses slump 25%. And as far as layoffs go, this is something that is set to happen, too.

"The New York Post" reported a couple of weeks ago that at a bank lunch with executives from all the prominent banks, the topic of discussion was layoffs and that they were expecting this as soon as the fall. And in a recent earnings call with Goldman Sachs, they were already implying that this is bound to happen. They said that they would bring back performance reviews for bankers, which historically have been designed to weed out the underperforming bankers. So they're preparing to trim their workforce.

AKIKO FUJITA: Yeah, in many ways, I mean, this has kind of been-- they've been signaling this, right, messaging this to prepare investors as well as their workers.

ALEXANDRA SEMENOVA: Yeah, absolutely.

AKIKO FUJITA: OK, Alexandra Semenova, thanks so much for--