Daily Agenda: Wall Street Banks Hint at More Layoffs

Earnings announcements suggest more bank staff reductions on the way; ruble hits new low versus U.S. dollar; Saudi Arabia moves to stem currency speculation.


John Taggart

Morgan Stanley and Bank of America released earnings yesterday. Both firms beat analyst estimates for the final quarter of 2015, joining JPMorgan Chase & Co., Citi and Wells Fargo in outperforming the streets expectations by some measures despite challenging conditions for fixed income and trading. What was notable in management discussions during these earnings announcements were the references to cost-cutting. As the oil slump and increased volatility in high-yield debt markets continues, major Wall Street banks appear poised to continue the stream of layoffs in trading divisions that began last year as segments such as merger advisory and wealth management take the spotlight. With most global equity markets having achieved or now nearing a technical bear market, industry insiders now are focused on how fast and how deep the headcount cuts will be.

Ruble hits record low. Battered by declining oil prices, the Russian ruble reached 80.798 versus the U.S. dollar today — lower than during the 2014 crisis that was precipitated by Western sanctions. This decline brings the total year-to-date contraction to 9 percent in dollar terms.

Saudi Arabia bans currency speculation. The Saudi Arabian Monetary Agency issued a directive yesterday to local banks banning options on Saudi riyal forwards in an apparent move to stop speculators from betting that the nation’s currency will slide further on oil prices and geopolitical jitters. Separately, in a media appearance yesterday, Saudi government officials insisted that the decision to continue current production levels despite a supply imbalance was not intended to hurt Iran as that country gears to resume exports after international sanctions are lifted.

Goldman Sachs reports mixed earnings. Fourth Quarter results released this morning by Goldman Sachs Group Inc. included revenues that beat street expectations handily as merger advisory fees rose by 27 percent versus the same period in 2014. Despite the rising profits from investment banking a hefty $1.54 charge for legal costs relating to settlements with regulators caused net-income to drop by almost 65 percent year-over-year. The firm’s shares declined slightly in pre-market trading in response to the news.

US inflation declines. December consumer price inflation index levels released on Wednesday by the US Bureau of Labor Statistics registered a contraction of 0.1 percent for the month, weaker than forecast. Core prices, those excluding volatile food and fuel inputs, registered at 2.1 percent year-over-year.