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Big banks implementing layoffs in restructuring push

Big banks Citigroup (C), Goldman Sachs (GS), and Wells Fargo (WFC) CEOs are feeling the pressure, not only with their third-quarter earnings expectations but also with shifts in staff size and business structure. Yahoo Finance's David Hollerith reports on Citigroup CEO Jane Fraser's plans to implement layoffs and the challenges putting a squeeze on the banking sector.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

JOSH LIPTON: Banks are gearing up to report their third quarter results later this month. The sector is feeling the heat as it faces the likelihood of higher for longer rates and keeping an eye out for potential recession. But some of the biggest banks are dealing with problems of a different sort, namely whether they can change. Here to break it down for us is Yahoo Finance's own David Hollerith. David.

DAVID HOLLERITH: Josh, so a couple of the country's largest banks are somewhere in the process of attempting these really big corporate shifts. And that's being led by their CEOs. Now, along with the possibility of higher interest rates for a longer period of time, this just adds an extra layer of complexity they've got to deal with when they do earnings. So Jane Frazier is attempting to eliminate middle managers at Citigroup, the country's third largest banks.

And this is sort of seen as an effort to revive the bank's stock price, which has lagged peers. And Goldman Sachs CEO David Solomon is trying to trim up the banks operations as it pulls out of consumer lending and focuses more on its core business of dealmaking. And CEO Charles Scharf, who is trying is trying to pull Wells Fargo back into a system of compliance and risk controls that regulators have approved by, but its legal troubles kind of keep resurfacing.

So on Citi, you know, we're not expecting any tangible numbers about the layoffs. But we do want some kind of update this huge reorganization, as she's described, it is still a bit murky. On Goldman Sachs, Solomon is lucky in that. We have seen a bit of a resurgence in the IPO market, but he's been the first to admit that the M&A market is going to take until next year to sort of reach normal levels again. He's also mentioned that there are some commercial real estate impairments that Goldman is going to probably take this quarter.

And then finally, on Wells Fargo, it's still paying fines for consumer and investor violations. And the big thing here is in 2016, they had a fake accounts scandal that's kind of still been resurfacing. They've spent about $13 billion paying fines to regulators since then. And about 235 million of that has come in August. And we're expecting Scharf to touch on that and obviously some kind of progress to getting regulators approval. The bank is not allowed to grow. And that's according to the Fed, which was instated in 2018, this rule they cannot expand at all.

JULIE HYMAN: All right. David, thank you so much. Dave Hollerith, appreciate you running us through what to expect on the management front for many of these banks.

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