The start of the year is normally a time when Europe’s bankers wait nervously for a word on their bonuses, but weeks into this year, some are starting to wonder if they will even have a job.
On Thursday, Deutsche Bank AG chief executive officer Christian Sewing put his staff on notice, saying he is looking to cut headcount including managers. HSBC Holdings PLC CEO Georges Elhedery earlier this week said it is shuttering large parts of its investment bank in Europe and the US.
Even Swiss private banking is not immune to the turmoil: UBS Group AG is shedding hundreds of jobs in its home market, while Julius Baer Group Ltd is set to announce a wave of redundancies over the next two years.
Photo: Reuters
Sewing told reporters that this year will be “the year of reckoning,” adding that “nothing is off limits.”
Behind all these disparate moves is a push to improve lagging profits, a concern that is only likely to get more acute as the US President Trump administration’s pro-business approach to deregulation in the US puts Europe’s lenders potentially at a disadvantage over their Wall Street rivals. In addition, stagnant growth in the EU is further threatening to weigh on the outlook for the region’s lenders.
The contrast between Europe’s and US banks is already quite stark. At JPMorgan Chase & Co, which this month announced the largest profit in its history, chief financial officer Jeremy Barnum said one of the biggest issues he faced was the “high-class” dilemma of what to do with all the excess capital the bank was generating.
The message from Goldman Sachs Group Inc CEO David Solomon was all about confidence as he talked about positioning the firm for a resurgence in dealmaking.
“It’s a reflection of how European banks have struggled to compete with their US peers” since the 2008 global financial crisis, said John Cronin, a Dublin-based financial industry analyst and founder of SeaPoint Insights. “If anything, given the new pro-growth Trump administration, the top five US banks will become relatively stronger over the coming years.”
To be sure, it is not all doom and gloom for Europe’s lenders. Some of them are planning to raise payouts this year. Deutsche Bank is looking at a 10 percent increase in bonuses for its investment bankers, while BNP Paribas SA is eyeing 5 percent. Barclays PLC is set to raise the number by as much as 20 percent after an improved year for traders and advisory teams.
The changes at HSBC, the most dramatic yet, are likely to unfold through June. Since taking charge five months ago, CEO Elhedery has been a man on a mission to give the British lender a complete makeover, with his latest move set to abandon all dreams of rivaling Wall Street peers.
“Going forward we will focus on areas where we can best serve our corporate and institutional clients,” said Elhedery’s lieutenant Michael Roberts, who heads the corporate and institutional banking division.
Still, the bank will have a strong footprint in Asia, especially China and Hong Kong, and the Middle East.
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