Layoff Season: How Banks Decide Who Goes Before Bonuses, and How to Read the Signs

Every fall, bankers ask us some version of the same question. The deal tape looks better. Profits are up. Why is my bank still talking about cuts?

This year the question is sharper. Barclays says it will cut about 5,000 roles in 2026, roughly 5% of a workforce of about 93,000, with about 1,000 of those already gone in the first half. Citi is deep into a multiyear overhaul that could remove up to 20,000 roles. HSBC has let go of about one in ten of its most senior people. And yet New York’s comptroller reported that Wall Street profits rose 51.3% in the first half of 2026, to $45.9 billion, and expects this year’s bonus pool to go up.

Both things are true at once. Cuts and big bonuses are not opposites. In most years, they are part of the same process. If you understand how that process works, you can read the signs early and protect your options.

Why banks cut in a good year

Year-end cuts are rarely only about a weak market. They usually come from a few places at the same time.

Cost targets. Banks promise investors a cost number, and they manage to it. Barclays booked about £600 million of “structural cost actions” this year, roughly double its earlier plan, while its third-quarter pre-tax profit rose 12% to £2.3 billion. When a bank is ahead on revenue, cutting cost is how it turns that into the returns it promised.

Strategy. When a bank decides a business is not core, headcount follows. HSBC has wound down much of its M&A and equity capital markets work in the UK, the US and continental Europe under CEO Georges Elhedery. That is not a performance call on the people. It is a decision about where the bank wants to compete.

Mergers. Integration cuts can run for years after a deal closes. UBS is still absorbing Credit Suisse: in its third-quarter results on Oct. 28, it reported almost 1,500 fewer full-time staff in the quarter as the integration progressed, and it says the integration is on track to be completed by year-end (Reuters). When two banks overlap, the duplicate roles tend to go in stages, not all at once.

Performance reviews. Most large banks run an annual review, and some departures follow from it. Goldman Sachs, for example, cut at least 1,300 people, roughly 3% to 4% of staff, after its 2024 review. This happens in strong years and weak ones. It is how banks make room to hire and to pay the people they want to keep.

How AI fits into this year’s cuts

AI is part of the story this year, though not always in the way headlines suggest. So far, most of the roles banks have tied to AI and automation sit outside the deal teams. Barclays CEO C.S. Venkatakrishnan described AI as “the icing on the cake,” with most of the bank’s efficiency gains coming from years of technology investment and simpler processes, and most of its cuts falling on operational and functional roles. At Citi, as we noted in Citi Moves to a Two-Year Analyst Program, nearly nine in ten employees were using the bank’s AI tools by the second quarter, management said it was reviewing more than 100 processes for end-to-end automation, and this year’s reductions have largely touched operations, middle-office roles, management layers and senior staff.

Inside banking teams, AI is changing the work faster than it is changing headcount. As we wrote in Judging Judgment: How Junior Bankers Learn, and Get Evaluated, When AI Drafts the Work, AI tools now handle much of the first pass on models, comps and decks, and junior bankers are increasingly expected to direct, check and explain that output. Goldman Sachs research has suggested AI could automate roughly a quarter of current banking work hours, with modeling and deck formatting among the most exposed tasks.

Where it shows up in staffing is at the junior end. In Rogo Was Supposed to Shrink the Junior Class, we noted that return-offer rates, which typically run 70% to 90%, were reportedly lower at some firms this cycle, with candidates told the reason was limited headcount rather than performance. At the same time, much of the review work has moved up to associates and VPs, and our own searches for banks using these tools lean toward experienced associates and VPs who can catch errors. The practical point for bankers at every level: being the person who can check, explain and stand behind AI-drafted work is becoming one of the strongest protections you have.

When cuts usually happen in investment banking

Cuts in investment banking follow the pay calendar more than the market calendar. As we wrote in When Do Layoffs Typically Occur in Investment Banking?, there are two main windows, plus a tense stretch in between.

1. The fall sweep: October and November. This is usually the first and often the larger round. By now, banks have set next year’s compensation budget, made promotion decisions and finished most of the year-end review work. Making changes at this point lets a bank settle headcount before pay is set, and it keeps severance separate from year-end compensation. It also leaves more of the bonus pool for the people who stay.

2. The run-up to bonus day: December to February. Bonuses are typically paid in the first quarter. Banks generally prefer to make changes before payout rather than pay a cash bonus and deferred stock to someone who is leaving, so the weeks before bonus day are a common time for departures. At HSBC in 2025, some investment bankers learned on bonus day itself that their roles were ending, and according to the Financial Times, as reported by City AM, those at VP and above did not receive a bonus.

3. The post-bonus adjustment: March and April. Once bonuses are paid, some bankers leave on their own. A few weeks later, management can compare the team it has with the pipeline it expects, and adjust. Many banks also start a new fiscal year around this time, which makes it a natural point for restructuring. Goldman Sachs has used both windows: its annual performance review led to cuts in September 2024, and again in spring 2025, when the bank planned to cut 3% to 5% of staff and called it “part of our normal, annual talent management process.”

And now, year-round. The calendar is getting blurrier. As we wrote in Rolling Layoffs and Talent Upgrades, more banks are moving from one large annual review cycle to rolling, performance-based exits, promotion holds and quiet backfill decisions spread through the year. Goldman, for example, has moved to rolling cuts that start in April and run through the summer. Large structural programs, like Citi’s, still come in announced waves. And individual terminations for misconduct or client issues can happen at any time, though those are isolated cases rather than part of a broader cut.

The practical point: decisions made in October and November usually show up between November and February. If your review is done, the pool is being split and you have not had a clear conversation about next year, this is a good time to pay close attention.

How banks make these decisions

From the outside, these decisions can feel unpredictable. In practice, a few factors usually carry the most weight.

• The ranking. Most banks group people into tiers after year-end reviews, and lower rankings carry more risk. Feedback scores matter, but so does who speaks for you in the room.
• Revenue and coverage. For VPs and above, the question becomes: what revenue, clients or mandates are tied to you? Bankers tied to client relationships tend to be more secure, while strong executors without their own relationships can be more exposed.
• Group strategy. If your group is being merged, reduced or exited, individual performance carries less weight. A strong banker in a business the bank is stepping back from can be more vulnerable than an average banker in one it is building.
• Cost per head. Senior roles cost the most. When a bank needs to reach a cost target, one senior role can represent the cost of several junior ones. That helps explain why HSBC’s senior reductions were significant.
• Sponsorship. These decisions run through managing directors and group heads. Having a senior advocate helps. Bankers whose MD has left, or who work across several MDs without a clear champion, can be more vulnerable.

How it plays out by level

Analysts and associates. Junior bankers have traditionally been the most protected layer, because banks need the work done. That is changing. We are seeing more analysts let go after their first year, usually through the year-end review rather than a broad reduction. With promotion gates tightening and more first drafts coming from AI tools, some banks are deciding earlier who will move forward. For first-year analysts, a solid review, steady staffing on live deals and a senior banker who knows your work matter more than they used to.

VPs and directors. This layer often feels the most pressure. VPs and directors cost more than junior bankers, may not yet own client relationships, and their work can sometimes be spread between associates and MDs. If your MD has left, your group is being reorganized, or you are seeing fewer new pitches, it is worth paying close attention.

MDs. At the top, the question is simple: does your revenue cover your cost? MDs without a book, or with a book in a sector the bank is stepping back from, can be vulnerable. HSBC’s reduction of about 134 senior staff, described as the largest in its top ranks since its disclosure records began in 2010, shows that seniority alone does not guarantee security when strategy shifts.

How it differs by type of bank

Bulge brackets tend to make changes at scale and on a schedule. Annual reviews, cost programs and strategy changes run in parallel, so changes can come in several waves. The upside is that packages and processes are usually more formal.

Elite boutiques tend to make fewer, more individual decisions. They run lean, so they rarely need large reductions, but a quiet year for a group or an MD departure can still lead to individual exits.

Middle-market and regional banks are more sensitive to their own deal flow. When volume in their core sectors slows, they may adjust quickly, and when it picks up, they often hire laterally from banks that are reducing headcount.

Signs to watch for in the next few weeks

No single sign means a change is coming. Several together are worth noticing.

• You are being left off new pitches or staffed on fewer live deals.
• Your MD or group head has left or been moved, and no one has clearly taken their place.
• Your review was mixed, or vague, and no one will talk about next year.
• Your group is “under review,” being combined with another team, or losing headcount through quiet departures.
• The bank has announced a cost number and is behind on it.
• Senior people stop including you in client conversations.

What to do before and after a cut

Before. Update your deal sheet now, while the details are fresh. Know what is in your contract about notice, deferred compensation and non-solicits. Have a few quiet conversations with people you trust outside your bank. And think hard about timing: in many cases, staying through bonus day is worth more than leaving early, unless your role is clearly at risk.

After. Take your time before signing anything. Ask for the offer in writing, understand how your bonus, deferred stock and benefits are treated, and negotiate. Our guide, Severance: How to Maximize Your Exit Package, walks through each piece of a package and how to push back.

Your story. Being part of a broad reduction is common, and good firms know it. What matters is how you explain it: what your group was doing, what you worked on, and what you want next. Keep it short, factual and forward-looking.

What this means for your career

Cut season and bonus season are two sides of the same process. Banks reduce headcount in some areas to pay the people they want to keep and to fund the businesses they are building. That is why the same bank can announce job cuts and record profits in the same week.

For bankers, the takeaway is not to worry, but to stay aware. Know where your group sits in the bank’s strategy, know who is speaking for you, and keep your options warm. The banks that are cutting today are often the same banks hiring laterally a few months from now, and the bankers who read the signs early usually have the most choices when that happens.

If you want a confidential read on where your group stands, or what the market looks like for your level and sector, we are always happy to talk.

Related reading

• When Do Layoffs Typically Occur in Investment Banking?
• Rolling Layoffs and Talent Upgrades: Are RIFs a Thing of the Past?
• Severance: How to Maximize Your Exit Package
• Judging Judgment: How Junior Bankers Learn, and Get Evaluated, When AI Drafts the Work
• Rogo Was Supposed to Shrink the Junior Class. Instead It’s Creating More Work for Associates and VPs.
• Citi Moves to a Two-Year Analyst Program: What It May Really Mean for Junior Bankers
• Why the Lateral MD Hiring Spree Is Your Promotion Problem

Sources

• ITV News, “Barclays to cut 5,000 jobs this year as AI makes work more efficient,” Oct. 22, 2026: link
• Fast Company, Oct. 22, 2026: link
• Fortune, “Citigroup CEO Jane Fraser on job cuts,” Jan. 14, 2026: link
• Share Talk, “HSBC cuts 10% of senior bankers in biggest cull since 2010,” Aug. 22, 2026: link
• Reuters via Global Banking & Finance Review, “UBS meets expectations with $2.7 billion Q3 profit,” Oct. 28, 2026: link
• City AM, “HSBC investment bankers axed on bonus day received no bonus,” Mar. 27, 2025: link
• HRKatha, “Goldman Sachs performance review results in at least 1,300 job cuts,” Sep. 2, 2024: link
• Allwork.Space (citing Reuters), “Goldman Sachs planning spring layoffs,” Mar. 5, 2025: link
• Prospect Rock Partners, “When Do Layoffs Typically Occur in Investment Banking?” Aug. 27, 2024: link
• Prospect Rock Partners, “Rolling Layoffs and Talent Upgrades,” Sep. 21, 2026: link
• Prospect Rock Partners, “Judging Judgment: How Junior Bankers Learn, and Get Evaluated, When AI Drafts the Work,” Oct. 10, 2026: link
• Prospect Rock Partners, “Rogo Was Supposed to Shrink the Junior Class,” Aug. 21, 2026: link
• Prospect Rock Partners, “Citi Moves to a Two-Year Analyst Program,” Oct. 5, 2026: link
• Office of the New York State Comptroller, Oct. 6, 2026: link