Bank of Montreal’s capital markets unit is cutting about 100 positions, or 3.5% of the division’s staff, in response to a weak environment for deals.
Half of those affected by layoffs are based in Canada, a source told Bloomberg on Wednesday.
A spokesperson for BMO Capital Markets did not return a request for comment by Banking Dive.
“We are focused on managing expenses dynamically, growing revenue and improving our relative efficiency ratio,” BMO spokesperson Kelly Hechler told Bloomberg and The Globe and Mail. “We are working closely with affected employees to provide support and to ensure they are treated with fairness and respect.”
This has been a challenging year for deal values, which have slumped 42% so far in 2023, compared with a year earlier, according to Bloomberg.
That’s played a factor in downsizing at several big banks. Morgan Stanley, Goldman Sachs, BNY Mellon, Capital One, Bank of America and Citi have all shed 1,000 positions or more this year — or plan to.
The layoffs come after hiring sprees in 2021 and early 2022. BMO Capital Markets had 2,849 employees as of April, a 400-person increase from two years prior, according to Bloomberg.
Compensation, though, has grown 17% year over year in the banking sector, making it a “disproportionate driver” of costs, according to research by National Bank of Canada analyst Gabriel Dechaine.
“We don’t recall sector expense growth ever hitting these levels, which shouldn’t be terribly surprising given we are in unique times, highlighted by 40-year high inflation rates,” Dechaine said in a note to clients this month, according to The Globe and Mail.
Cuts to capital markets groups at Canadian banks, in particular, have been “a long time coming,” Adam Dean, founder of the recruitment firm Dean Executive Search, told the outlet, adding that deteriorating equity and debt market conditions have crushed revenue.
“These things tend to come in waves, and the real question is going to be which bank is next,” Dean said.
Royal Bank of Canada CEO Dave McKay told analysts last month that it, too, is looking to cut expenses after its own hiring spree.
“Honestly, we overshot — we overshot by thousands of people,” he said, according to Bloomberg. Workforce reductions, he said, would come through attrition and slower hiring.