Investment banking is undergoing a quieter but substantial workforce adjustment that, while receiving less media attention than previous cycles, represents a significant recalibration across the industry. The reductions are being executed with surgical precision: Morgan Stanley is streamlining operations by approximately 2,000 positions, Bank of America has tactically reduced 150 junior banker roles alongside measured cuts affecting 1% of their investment banking workforce, and Goldman Sachs is methodically adjusting staffing by 3-5% through what they characterize as routine annual performance management. While these moves lack the dramatic headlines of past downturns, they collectively signal a deliberate industry-wide rightsizing that may prove more impactful than the more publicized mass layoffs of previous eras.
The root cause traces back to what industry insiders call the “2021 hiring boom hangover.” During the pandemic-era deal-making frenzy, banks went on a hiring spree to keep up with unprecedented transaction volumes. When the Federal Reserve began raising interest rates in 2022, deal flow plummeted by more than 50%, leaving banks dramatically overstaffed. Global investment banking fees fell 6.3% to $16.83 billion in the period from January 1 to March 13, versus $17.96 billion a year earlier, while U.S. mergers and acquisition activity in the first two months of 2025 has seen just 1,603 deals signed through Friday, making it the slowest pace by volume since 2009.
What makes this correction particularly painful is its timing. Banks had anticipated a surge in deal activity under the Trump administration’s business-friendly policies. Instead, policy uncertainty, tariff threats, and geopolitical tensions have kept companies on the sidelines. As one senior banker noted, “The level of uncertainty is a little bit higher, and that has kept some things on the sidelines.”
The Seasonal Rhythm of Wall Street Cuts: When Layoffs Typically Occur
Investment banking layoffs follow a predictable seasonal pattern that reflects the industry’s compensation and performance review cycles. The primary layoff season occurs during the first quarter, specifically between January and March, with most cuts happening after bonus payments in February. This timing serves a dual purpose: banks retain talent through the lucrative bonus season while simultaneously conducting their annual performance evaluations.
Traditionally, these Q1 cuts target the bottom 5-10% of performers—what the industry euphemistically calls “annual talent management processes.” However, 2025’s cuts go far beyond typical performance-based eliminations. They represent structural adjustments to match staffing levels with current deal flow realities.
Bank of America’s situation illustrates this perfectly. The bank’s annual report shows staff turnover was only 8% in 2024, well below the historical norm of 12%+ turnover in most years. When employees aren’t leaving voluntarily at normal rates, banks must make more aggressive cuts to right-size their operations.
The secondary layoff season typically occurs in late summer or early fall, often triggered by poor first-half performance or worsening market conditions. Given current trends, many industry observers expect a second wave of cuts in summer 2025, particularly if the anticipated deal recovery fails to materialize.
2025’s Banking Carnage: A Bank-by-Bank Breakdown
Morgan Stanley leads the current round of cuts with approximately 2,000 planned terminations by March 2025. Notably, the bank’s 15,000-strong financial advisory division remains largely protected, indicating strategic preservation of client-facing revenue generators while cutting back-office and support functions.
Bank of America has taken a more sophisticated approach that exemplifies the industry’s evolution toward strategic workforce management. Beyond eliminating 150 junior investment banking positions, the bank has implemented what industry insiders call “strategic redeployment”—moving mid-level bankers to compliance and control functions rather than terminating them outright.
This approach serves multiple financial purposes. When BofA redeploys a vice president with $500,000 in unvested stock to a compliance role instead of firing them, the bank avoids immediate equity acceleration while creating pressure for voluntary exits. Internal data suggests that 65% of redeployed bankers leave within nine months, forfeiting substantial unvested compensation that never hits the P&L.
The bank’s annual report reveals unusually low 8% staff turnover in 2024, well below the historical 12%+ norm, making redeployment an attractive alternative to forced cuts. For a typical cohort of 25 redeployed mid-level bankers, this strategy can save approximately $3.3 million in compensation expenses during market downturns—a meaningful quarterly earnings contribution without the public relations challenges of mass layoffs.
The bank has also reduced its campus hiring from 2,500 graduates in 2023 to 2,000 in 2024, signaling long-term capacity adjustments rather than temporary cuts. This combination of tactical redeployment and strategic hiring reductions allows BofA to right-size operations while maintaining flexibility for future market recovery.
Goldman Sachs has accelerated its traditional annual review process, bringing forward cuts that typically occur later in the year. The bank continues to characterize these reductions as normal talent management, though the scale and timing suggest more aggressive action than usual.
JPMorgan Chase began informing employees of job cuts in February 2025, marking the start of several planned reductions this year despite reporting its highest-ever annual profit in 2024. The bank’s approach focuses on selective cuts and performance management rather than broad workforce reductions.
Citigroup announced ongoing job cuts in January 2025, continuing CEO Jane Fraser’s major restructuring that aims to eliminate 20,000 positions over the medium term. The bank is cutting roles in wealth and technology units while reducing positions in client data analysis teams, characterizing these as “normal course” leadership changes and targeted staff adjustments.
Deutsche Bank announced plans to cut 3,500 jobs through 2025, primarily back-office roles, as part of CEO Christian Sewing’s €2.5 billion cost savings plan. The German bank also took a €233 million write-down on its acquisition of London-based boutique Numis, signaling broader strategic adjustments.
Barclays launched workforce reductions affecting approximately 200 positions across banking and trading desks, while also announcing plans to cut up to 2,000 back-office jobs. The bank laid off 78 employees in New Jersey in March 2025, following 69 layoffs in January, as part of automation and technology upgrade initiatives.
Bridgewater Associates, the world’s largest hedge fund, dismissed 90 employees (7% of its workforce) in January 2025, citing the need to maintain organizational agility and strategic alignment.
TD Bank rounds out the major cuts with 2,000 layoffs (2% of workforce) as part of a comprehensive restructuring program targeting C$650 million in annual savings. While not exclusively focused on investment banking, these cuts reflect broader industry pressures affecting all financial services firms.
The Hiring Freeze Reality: When Banks Interview But Don’t Hire
Perhaps the most frustrating aspect of the current market is what industry professionals describe as “ghost hiring”—banks conducting extensive interview processes without making offers. Investment banking professionals report being strung along through multiple rounds of interviews only to have positions mysteriously disappear or go to internal candidates.
This phenomenon reflects banks’ conflicted approach to talent management. Senior executives recognize they’ll need skilled investment bankers when markets recover, but current economics prevent them from adding headcount. The result is a hiring process that maintains the appearance of recruitment while rarely resulting in actual job offers.
Bank of America exemplifies this contradiction. While officially maintaining a hiring freeze and shifting people internally rather than letting them go, the bank continues hiring for specific high-performing areas. This selective approach allows banks to strengthen profitable divisions while reducing headcount in struggling areas.
The regulatory environment adds another layer of complexity. The FDIC hiring freeze ordered by President Trump has rescinded more than 200 job offers for bank examiners, potentially affecting the broader regulatory landscape that governs bank operations.
Impact on Different Career Levels
Entry-Level Analysts: Face the most challenging environment, banks have been much more selective with A2A promotes. Analysts can no longer rely on the automatic promotion option; many banks (who have insanely large summer and full time 1st year classes) have been terming out analysts after 2 years.
Associates and VPs: Experience the highest layoff risk as banks target mid-level positions that don’t generate direct revenue. Lateral moves have become extremely difficult as most banks aren’t actively hiring at these levels.
Directors: Sadly this level is always at the highest risk. Execution focus directors are expensive.
Managing Directors: Remain relatively protected due to their client relationships and revenue generation capabilities. Non-performing MDs not on a guaranty are at risk. Some middle-market firms are actively recruiting senior talent, viewing the market disruption as an opportunity to build teams.
Geographic and Sector Variations
The layoff impact varies significantly by geography and sector specialization. New York continues to dominate with 21.1% of investment banking jobs, but competition for these positions has intensified dramatically. European banks face additional pressures from slower economic growth and regulatory changes, while Asian markets show more resilience despite global headwinds.
Sector specialization provides some protection. Healthcare, technology, and financial services remain relatively active, while traditional industries like consumer goods and industrials face greater pressure. Energy and infrastructure banking benefit from ongoing transition investments, though traditional oil and gas work has declined.
The Path Forward: Predictions and Recommendations
The investment banking employment landscape will likely remain challenging through at least the first half of 2025. Industry experts expect continued headcount reductions as deal outlook remains dampened, particularly in advisory services where revenue has most significantly declined.
However, several factors could drive recovery. Interest rate stabilization, policy clarity from the Trump administration, and pent-up corporate demand for capital could trigger a deal-making rebound in the second half of 2025. Banks positioning themselves with lean, high-quality teams may benefit most from any recovery.
Career Strategy
For mid-level bankers, the golden handcuffs of deferred compensation have become potential golden shackles. Those with significant unvested equity face harder choices during market downturns, regardless of performance. The smartest professionals are renegotiating toward more cash and less deferred compensation to maintain flexibility.
Junior bankers entering the field should understand that redeployment represents a new career risk. While it provides a softer landing than outright termination, it often signals the end of advancement opportunities within investment banking. Building portable skills and maintaining external networks becomes crucial for navigating potential redeployment scenarios.
The current employment paradox in investment banking reflects broader economic uncertainties and structural changes in financial services. Those who understand these dynamics and adapt accordingly will be best positioned for long-term success in this demanding but rewarding industry.