Poll shows more job cuts expected in banking sector

Bloomberg

Fri, Jan 23, 2015 - Page 15

The bloodletting at banks that started during the 2008 financial crisis is not letting up in the view of 83 percent of respondents to a quarterly Bloomberg Global Poll, who said the banking industry will continue cutting jobs this year.

The cuts will affect firms around the world, 61 percent of respondents said, while 21 percent said most cuts would be in Europe and 1 percent said they would be concentrated in the US. Only 8 percent expected banks to add jobs this year.

In a separate question, 78 percent of respondents said they did not expect the largest banks to break up as a result of tougher regulations penalizing them for size and complexity.

“Sharp market moves, slow economic recovery, the regulatory burden — all these are restricting banks’ operations,” said Daniel Baker, a London-based analyst at Informa Global Markets and a poll respondent. “We’ll see more job cuts in the sector until things stabilize.”

Financial firms are struggling to regain their footing years after a US housing-market collapse was followed by a European sovereign-debt crisis. Four of the biggest US and UK banks have reduced total employment by almost 350,000 since the beginning of 2008, according to data compiled by Bloomberg.

A weak global recovery and regulations designed to prevent another crisis have dented profitability at the largest firms.

Banks have eliminated equities jobs in Asia. Brokerage CLSA Ltd has cut about 25 staff, mostly in the region, a person with knowledge of the matter said.

European banks already have announced job cuts this year. London-based Standard Chartered PLC said it would eliminate 4,000 consumer-banking positions. Deutsche Bank AG, based in Frankfurt, is weighing staff reductions and asset sales as part of a strategic review, according to a person with knowledge of the matter.

Citigroup Inc has cut more jobs than any other bank, reducing head count by 133,000 in the past seven years. Most European lenders started cutting after 2010, when the eurozone’s existence came into question as failing lenders and government rescues got caught in a dangerous spiral.

American Express on Wednesday said that it plans to cut more than 4,000 jobs this year, about 6 percent of its total workforce. The New York-based credit card company said the cuts are part of a company-wide efficiency drive. The announcement came as it reported an 11 percent rise in fourth-quarter profit.

The cuts will span the company’s US and international operations and will take place over the course of the year, the Associated Press reported, citing American Express spokeswoman Marina Norville.

The company will take a US$313 million pre-tax charge in the fourth quarter, partly as a result of the cuts, the report said.

The poll of 481 investors, analysts and traders who are Bloomberg customers was conducted on Wednesday and Thursday last week by Selzer & Co, a Des Moines, Iowa-based firm. It has a margin of error of 4.5 percentage points.

In response to the question about whether banks will break up, only 13 percent of respondents expected at least one big firm to do so this year. The respondents predicting that banks will remain intact include 58 percent who said lenders will refine their business models and 20 percent who said changes will not meaningfully alter those models. Nine percent said they were not sure.

Big banks might resist pressure to split as they seek to preserve advantages conferred by size.

“The very cheap financing is due to the government guarantee that makes large banks viable, and that hasn’t changed despite all the new rules,” said Gyula Lencses, a poll respondent who helps manage US$750 million at the Hungarian unit of Raiffeisen Bank International AG. “To properly manage a breakup is also very hard, so nobody wants to take that risk.”