The global banking turmoil will
have a dramatic effect on staff numbers as banks look to make rapid
cost savings in the face of declining business volumes. The next 12
months will be key, especially in the likes of the US, UK, German
and Spanish markets – which all face difficulties going forward.
Research by John Hill.

Job losses in the financial sector are very much back in the
spotlight, especially in the US and UK, the two markets most
affected by the banking industry turmoil (see A catastrophe
measured in trillions
). Acquisitions and nationalisations –
such as Bank of America picking up Merrill Lynch and JPMorgan Chase
inheriting most of Washington Mutual – will help limit the number
of job losses, though the prevailing sentiment is that the banking
industries in many markets will necessarily shrink, along with
staff numbers.

At the end of September, HSBC announced plans to axe 1,100 jobs
across its global footprint, with half based in the UK, for
instance. The bank, which has over 310,000 staff worldwide, said it
had opted to reduce its workforce, “because of market conditions
and the economic environment, and our cautious outlook for

According to a Retail Banker International survey of
staff numbers at 30 leading bank groups, staff numbers increased by
nearly 8 percent between the first-half of 2007 and the first-half
of 2008. Retail banking staff also increased, by just over 5
percent, though a number of banks actually cut retail banking

Wachovia, for instance, crippled by its disastrous acquisition
of Golden West in 2006 and now sold on the cheap to Citigroup,
dropped retail banking staff numbers by 5.5 percent

UK to suffer the most?

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In terms of banking personnel, the UK banking industry could
suffer the most – more in relative terms than the US market –
though there are others looking vulnerable.

Spain’s domestic banking market, for instance, may be set for
consolidation in the wake of its housing slump (see RBI
), and the German banking industry, which has itself gone
through widespread consolidation over the past three months, could
also see large numbers of jobs lost as banks seek cost
synergies.Cost-income ratios at 30 banks

Deutsche Bank’s recent acquisition of a stake in Deutsche
Postbank (see News Digest) will have no impact on branch
numbers or jobs, according to Deutsche Bank, but Commerzbank’s
acquisition of Dresdner is forecast to result in the closure of at
least 300 branches (see also RBI 598).

Commerzbank’s chief financial officer, Eric Strutz, stated that
9,000 full-time positions will be reduced in a “socially
responsible way” over the next three years, of whom 2,500 will be
outside Germany. Around 70 percent of these relate to back office,
control and production units, as well as in investment banking.

“We regret the job reductions, though they are unavoidable.
However, only a strong bank can offer secure jobs over the long
term,” said Strutz last month.

But it is the banking industry in the UK which has undergone the
most significant change over the past 12 months, with six major
mergers and/or acquisitions and nationalisations. The collapse of
Northern Rock, the country’s fifth-largest mortgage lender, in
August last year has since been followed by the acquisition of
sixth-largest Alliance & Leicester by Spain’s Santander; the
acquisition of the fifth- and seventh-largest mutuals (Derbyshire
Building Society and Cheshire Building Society) by the largest,
Nationwide; the engineered rescue of the country’s largest mortgage
bank, Halifax-Bank of Scotland, via a quick sale to Lloyds TSB; and
the nationalisation of Bradford & Bingley.

Spain’s Santander, which is picking up significant parts of
Bradford & Bingley’s franchise for £600 million ($1 billion),
has stated clearly that staff numbers at Alliance & Leicester
will be cut as it merges A&L into its established UK
subsidiary, Abbey. And Lloyds TSB, while not making any firm
statements on the number of possible job cuts, has stated that the
combination with HBOS will lead to cost synergies in excess of £1
billion by 2011 – in terms of retail banking, Lloyds TSB said in a
statement to the London Stock Exchange that there will be
“elimination of branch duplication… an integrated IT platform, cost
avoidance and divisional and other consolidation”.

In its half-yearly results, published before the deal with HBOS,
Lloyds TSB said that over the previous 12 months, staff numbers
fell by 1.6 percent to 58,493, largely as a result of efficiency
improvements in back-office processing centres. These helped reduce
the group cost-income ratio from 48.6 percent to 46.6 percent.
HBOS’s cost-income ratio was itself relatively low, at 49 percent,
and after synergies, the new combined group’s cost-income ratio is
expected to be below 40 percent, according to the stock exchange
announcement by Lloyds TSB.

And the changes in the UK may be far from over: Royal Bank of
Scotland (RBS) remains under intense pressure, with a growing sense
that it may have to be split up.

Substantially increasing staff numbers

According to the RBI survey, over the past 12 months a number of
banking groups have increased staff numbers, including Barclays,
BBVA, Intesa Sanpaolo, Rabobank, Société Générale and UniCredit.
Both Intesa Sanpaolo and UniCredit have benefitted from major
acquisitions over the time period; UniCredit, for instance,
effectively doubled its retail banking staff via its rapid
acquisition of domestic rival Capitalia last October.

Société Générale, hit almost fatally by a $7 billion trading
scandal earlier this year (see RBI 586), announced a major
recruitment drive at the end of last month. The bank’s plan, which
included a large advertising campaign, is to recruit 5,500 new
staff in France and a further 15,000 worldwide in 2009.

And despite some upswing momentum from the likes of Société
Générale, the big increases in staff numbers are more likely to
focus on emerging, underbanked economies such as China, India and
Brazil. It is the more saturated, overbanked markets in the West
that will undergo significant banking consolidation, with a
commensurate fall in the demand for retail banking staff – a
process catalysed by the ongoing distribution shift to electronic,
direct channels.

HSBC said in its interim results, for instance, that gross
balances via direct channels were up 20 percent to $16.1 billion
against the second-half of 2007.

Number of staff at 30 selected banking groups