Morning Coffee: Morgan Stanley is cutting jobs, Goldman Sachs will probably be next. The secret police at Citi

It's always been the case that investment banks cut jobs in the final quarter of the year - maybe even directly before bonuses in the case of HSBC - but trimming in the opening quarters of the year is also a thing. Morgan Stanley and Goldman Sachs did it in 2025 and now we understand that Morgan Stanley and Goldman Sachs will do it again in 2026.

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The Wall Street Journal reports that Morgan Stanley is cutting 2,500 people across investment banking and trading, wealth management and investment management. Many of the cuts already happened last Wednesday. They were partly the result of 'shifting business location,' which typically means middle and back office jobs being moved to low cost regions overseas.

Goldman Sachs' coming job cuts have yet to be reported, but insiders at the firm tell us they're coming too, with cuts likely in the next few months. Goldman Sachs declined to comment.

Last year, Morgan Stanley, Goldman Sachs and Bank of America all announced job cuts in March. Each found themselves with an excess of people, in part due to existing employees' unwillingness to resign. This year, insiders at Goldman Sachs tell us the "churn" has once again been poor, despite some engineering and operations staff receiving poor bonuses in an effort to encourage them on their way. 

After an outstanding 2025, banks were initially ebullient about 2026. Since last Saturday, though, things have changed. America and Israel's war with Iran risks delaying M&A deals and IPOs, increasing inflation and postponing interest rate cuts, and creating the sort of unforeseen volatility that contributes to trading losses (and maybe gains). This is being combined with the rising tide of AI and reported write downs and withdrawals in private credit. As ex-Goldman Sachs CEO Lloyd Blankfein quipped, "the horses are whinnying in the corral" for the next financial crisis. 

Hopefully that instinct is wrong. Either way, these small rounds will not be the only cuts we see this year.    

Separately, the Financial Times reports Citi has got a unit Citi Security and Investigative Services (CSIS), which is deployed to investigate accounts of employee wrongdoing. 

While this sounds good in theory, in fact insiders at the bank tell the FT that CSIS seems more intent on using its internal police force against its own employees who report wrongdoing than against the perpetrators. Multiple employees interviewed by the CSIS tell the FT that their interviews were subsequently used by the bank to defend itself in legal cases. They include Ardith Lindsey, the Citi MD who claims to have been subject to sexism, harassment and assault there.

Citi told the FT that its CSIS team, "consists of highly experienced professionals whose responsibilities include supporting Citi disaster response efforts, protection for colleagues around the world and looking into certain concerns about colleague behaviour along a clearly laid-out set of guidelines.”

Meanwhile...

Barclays is owed $700m by collapsed mortgage lender Market Financial Solutions Ltd. (Bloomberg) 

The war in the Middle East has upended popular trades at the start of 2026. Asian and European equities and have suffered losses, as has gold. Wall Street indices and the US dollar are buoyant. “The US will be in a better position to cushion any blow from sharply rising energy prices...Asia, Europe . . . they are all net energy importers”. (Financial Times) 

Banks are having second thoughts about expanding in the Middle East. “The main thing we want to see is stability. The worst thing for us is to be in places where we don’t have visibility over the next two to three years and where there could be massive change.” (Financial News) 

Companies are worried about IPOs. “For IPOs to come to market, it’s really going to be a question of sector exposure...It’s also going to be a matter of whether you have a deal where the foundations have been laid so you can be in and out of the market very quickly.” (Bloomberg) 

An affliliate of Squarepoint is starting a new electronic-trading unit called STG Securities, which will operate a market maker alongside a hedge fund business. (Bloomberg) 

Marc Rowan at Apollo doesn't like Jeffrey Epstein. “I didn’t like him for my own reasons, he wasted my time. Even from the grave, he’s wasting my time.” (Bloomberg) 

Abderdeen Asset Management cut Bloomberg terminals and other vendor products to save £150m in costs. We were buying too much and we weren’t buying smart enough. We’ve looked at contracts, reset them and tightened them up.” (Financial News)

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