Banks in Europe cut 60,000 jobs in 2019Dwain Ross 17 / January / 20 Visitors: 36
Banks in Europe cut 60,000 jobs in 2019
The expected consolidation of the European banking sector may lead to a new round of bank employee cuts. Moody's outlook for global banks for the next year was negative.
A common saying in the Western banking sector is that "it is impossible to cut everyone", but still, after another busy year, European bank leaders have no choice but to cut tens of thousands of jobs to try to solve the problem of chronically low profitability.
With the European Central Bank's long-term negative rates, slowing economic growth, Brexit and tighter regulatory requirements, creditors in Germany, the UK, France, Spain and Switzerland collectively announced job cuts of more than 60,000 for the current year (2019).
In the top ten banks in Europe by market capitalization, the number of employees fell by one fifth since 2008, to 1.1 million. This is contrasted with the situation in the USA, where the number of employees in the top ten banks is about 7%.
Staff cuts in the European region have mainly affected investment banks, which are suffering from the industry-wide decline in revenues, as well as the loss of market share captured by American competitors.
Rating agency Moody's, which this week changed the outlook for global banks from stable to negative, warns that "the gap in profitability between banks in the euro area and global banks will grow" in the medium term, despite large staff cuts.
Staff cuts at Deutsche Bank were the most severe. After his unsuccessful attempt to merge with Commerzbank, CEO Christian Xwing announced a departure from investment banking during the summer, which led to the loss of 18,000 jobs and the creation of a new "bad bank" to get rid of €288 billion of undesirable assets.
In France, Société Générale Bank cut 1,600 employees in securities and exchange trading, representing around 8% of the division's workforce. This measure was part of a plan to save €500 million in annual costs, which was adopted after the division was unable to continue to generate an acceptable level of profitability.
BNP Paribas also stated that trade revenue was affected by "extreme market conditions", which forced the bank to reduce its financial targets and further cut costs by €600 million. The bank closed its own trading unit, Opera, which worked hard to make a profit during its short existence.
In the UK, Noel Quinn, the interim head of HSBC Bank, appointed after his predecessor was dismissed for lack of determination, is also preparing a plan to cut costs, which will lead to the loss of thousands of jobs.
One of HSBC's banking modernization specialists said that the combined effect of cutting costs, reducing risk assets in the U.S. and selling a business such as HSBC's French retail bank could lead to a much larger reduction in the bank's headcount over time - by about 238,000 employees - in about 2 years, when the main modernization work will be completed.
More recently, UniCredit Bank has announced that it plans to cut 8,000 jobs and close 500 branches to save €1 billion as Chief Executive Officer Jean-Pierre Mastier continues the major modernization of this Italian lender.
The next few years could bring even more pain to the employees. Many of the European lenders are now positioning themselves as victims of a new wave of banking sector consolidation that may begin if European politicians and regulators soften their opposition to a full banking union.
This could pave the way for cross-border bank mergers within the EU, which would inevitably lead to a more "optimal size" of banks, as removing these barriers and introducing financial technologies would further reduce banks' human resource needs, especially in retail units and branches of the network.