BANKS are continuing to make heavy job cuts as they adjust to a “new normal” of reduced business in the wake of the financial crisis, a survey has revealed.
The overwhelming majority of UK banks again took the axe to their workforce in the three months to March, according to the financial services survey published by employers’ body the Confederation of British Industry and accountant PricewaterhouseCoopers today.
The likes of part-nationalised lenders Royal Bank of Scotland and Lloyds Banking Group, owner of Bank of Scotland, have been among those cutting staff numbers as they seek to rebuild profits.
According to Unite, the union that represents many bank workers, Lloyds and RBS have together announced 38,300 job losses from 2008 to 2010, many of them in Scotland.
The financial services sector as a whole shed an estimated 10,000 to 12,000 roles, according to the CBI, and is poised to lose another 4000 posts in the coming quarter, out of a total workforce of around one million. This is the second consecutive fall after a brief pick-up in staffing numbers last year.
Andrew Gray, UK banking leader at PWC, said: “Banks see their value of business is not going to be as high as it was three or four years ago. They are experiencing increased costs from a number of different directions such as increased levels of capital and lower profitability of the new business they are writing.
“They are now looking at efficiencies they might not have done before.”
He said banks are closing branches and seeking to persuade customers to do more transaction online or by telephone. They are also cutting bank office roles.
He added: “Costs are going to continue to be trimmed and a number of banks are actively looking at cutting costs that will inevitably lead to job losses as that is a major part of their cost base.
“They now regard that their level of business is near normal. We do know the underlying level of activity is well below that before the crisis which suggests banks are adjusting to what they think the new normal level of business is going to be going forward.”
The mood generally for financial services companies is positive.
For the financial services industry as a whole 33% of firms said that volumes rose in the three months to March and 11% said they fell, a result far more positive than had been expected.
Growth in business is anticipated to pick up a little further in the coming quarter.
Profits were up in the sector at the fastest rate since December 1993 and a similar improvement is expected in the coming quarter.
This was partly as a result of falling bad debts. The level of non-performing loans is falling at the fastest pace since December 1996. This helped offset rising costs.
Life insurers are benefiting from large amounts of new business. This comes ahead of the implementation of the retail distribution review next year, which will outlaw commission payments to financial advisers and lift the lid on charges paid by consumers.
Investment managers were the most upbeat in the financial services sector.
But Pars Purewal, UK asset management leader at PWC, indicated they could face headwinds from 2012 when the retail distribution review is implemented. He said: “We think as there is more clarity about who receives the fees in that chain, our expectation is that there will be a slight reduction in management fees managers charge into the fund, particularly when the customer sees the different people who take a slice and questions the value that is being provided by each of these stakeholders.”