European banks have struggled since the global financial crisis, and jobs are being cut region-wide as financial institutions attempt to recoup profits in order to invest in digital technology. High regulatory costs, negative interest rates and volatile markets are reducing margins. The number of staff working for 26 European banks has dropped by 150,000 to 2.1 million since the end of 2007.
European banks are ramping up digital transformation and cutting back on jobs in efforts to improve profits, according to Bloomberg. Some 20,000 jobs are being slashed Europe-wide. Amsterdam-based ING Groep NV has announced that it will eliminate 5,800 positions, Commerzbank AG in Germany is cutting staff by 9,600 and Banco Popular Espanol SA in Spain will cut 3,000 jobs. Deutsche Bank AG has been negotiating with labor representatives to eliminate about 1,000 jobs in Germany. Last year, Deutsche Bank Chief Executive Officer John Cryan announced plans to cut the global workforce by 9 percent.
European banks have barely recovered from the global financial crisis and the fiasco over sovereign debt. Since then, negative interest rates, stricter regulations and capital requirements, along with volatile markets, have been digging into bank profits. According to Karim Bertoni, fund manager at Bellevue Asset Management in Switzerland: “Banks are facing high regulatory costs and competition on margins and pricing due to the low-rate environment. They are trying to reduce costs, and people are one of the biggest parts of that.”
The value of financial firms, which account for just over 10 of the Stoxx Europe 600 Index, is down from a 23 percent weighing 10 years ago, close to the record low. Also, the Bloomberg Europe Banks and Financial Services Index has dropped by almost a quarter in 2016; UniCredit SpA is down more than 60 percent.
David Kelly, chief global strategist at JPMorgan Asset Management, told Bloomberg that banks are unable to lend because regulations, fines and low rates are hitting them hard.
Banks are investing in digital technology to boost profits in the long term. ING is investing €800 million in new technology, while it expects to recoup €900 million euros a year through job cuts. ABN Amro Group NV is to cut its workforce by 6 percent through 2020. Germany’s Commerzbank, the nation’s second-largest, will cut one-fifth of its jobs, decrease securities trading and postpone dividends.
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