More job cuts are coming to the big banks in both Europe and the U.S. in 2016, with announcements of 100,000 job cuts already in the ether and thousands more expected from Barclays and BNP Paribas in the next few weeks, according to Financial Times. This year’s cuts, which round out a wave of bank layoffs that has been washing through the ecosystem since 2007, will amount to more than 10 percent of the workforce across the 11 largest banks in the U.S. and Europe.
Rabobank of the Netherlands is the latest participant in the purge, with 9,000 cuts announced. It followed a 1,200-person layoff announcement by Morgan Stanley.
Barclays and BNP Paribas will reportedly cut jobs that will strip out 10 to 20 percent of the costs at their investment banks, people familiar with the situations said. Barclays will hold off its cutting call until Mar. 1, when CEO Jes Staley announces the bank’s annual results. It is widely expected that Staley will, at that time, announce plans to shrink Barclays’ investment bank, which employs about 20,000 people.
Low interest rates combined with higher regulatory costs have cut into banks’ revenues for almost a decade, leading to the discovery that they have too much staff. A wave of incoming CEOs, notably at Deutsche Bank, Credit Suisse and Barclays, has also accelerated the layoffs, as the market has now put this odd freshman class of sorts under a great deal of pressure to turn sick banks into reliable profit centers again.
And the misery may be particularly, well, miserable in 2016, with new regulations requiring more equity, which, in turn, requires higher profits to meet investor demand for return on equity.
“I don’t think we can rule out the end of job cuts until RoEs recover to acceptable levels,” said Jon Peace, London-based banks analyst at Nomura.
“Digital transformation could also be a driver of further headcount reduction longer term, with retail banks cutting branches in favor of online services and investment banks cutting back offices in favor of online technologies, such as blockchain.”
Though the problem is more acute in Europe, U.S. banks and their employees are far from safe.
“The additional electronification of the security markets should result in an ongoing swap of capital for labor … more machines over people,” noted Mike Mayo, New York-based banking analyst at CLSA.
Mayo further noted that the situation is additionally encumbered by the fact that U.S. banks are also feeling the pressure of “the worst decade of revenue growth since the great depression.”
U.S. banks and insurers cut almost 400,000 jobs during the first five years of the financial crisis, U.S. census data shows.