European Lenders Announce 60K Job Cuts

European banks have been forced to slash more than 60,000 jobs as they face falling profitability, The Financial Times reported on Saturday (Dec. 7).

Lenders across Germany, the U.K., France, Spain and Switzerland have suffered due to Brexit, slowing economic growth, increasing regulations and the European Central Bank’s negative interest rates.

The workforce at Europe’s 10 largest banks is down to 1.1 million people, a fifth lower since 2008. Conversely, employment at the top 10 U.S. banks dropped about 7 percent.

The region’s struggling financial institutions are mostly comprised of investment banks suffering from a combination of revenue declines and market share losses to U.S. rivals.

Moody’s changed its forecast for global banks from stable to negative and said that in the medium term, the “profitability gap between euro-area banks and global peers will widen further” despite mass layoffs.

“The costs of reducing overcapacity through restructuring . . . are front-loaded, while profitability gains will accrue over the longer term,” Moody’s analysts warned in a report, according to FT.

The steepest cuts have been at Deutsche Bank, with 18,000 job losses and the creation of a new “bad bank” to dispose of €288 billion of unwanted assets, following a failed merger attempt with Commerzbank.

In France, Société Générale slashed 1,600 jobs in its securities and trading unit — about 8 percent of the division’s workforce — as a cost-saving strategy to save €500 million in annual costs.

BNP Paribas reduced its financial targets citing “extreme market conditions” and is looking to cut costs by €600 million. It also shuttered its proprietary but unprofitable trading arm, Opera.

In the U.K., HSBC’s interim chief executive Noel Quinn is formulating a cost-cutting strategy that will trigger thousands of layoffs. Quinn is “auditioning” for the CEO slot following the firing of his predecessor because of indecisiveness.

Italian lender UniCredit is planning to cut 8,000 jobs and 500 branches to save €1 billion.

In March, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said European banks should look beyond their borders for mergers to take advantage of the full economic power of the region. He said there was “some truth” to the notion that Europe was overbanked and blamed the European Union and its regulations for slowing the consolidation of financial institutions.