Major financial firms are trimming their payrolls. In first-quarter earnings announcements this month, Bank of America, Citigroup, JPMorgan Chase, Goldman Sachs and Morgan Stanley revealed they have slashed more than 31,000 jobs, or 3.5 percent of their combined workforce, in the past year.
For three of those banks, it was the second straight year of cutbacks.
At a time when many banks are reporting higher or even record earnings, the cuts are unsettling to an entire industry.
The losses are an unwelcome reminder of the financial meltdown and its lingering effects. A slow, halting recovery has kept loan demand in check. Low interest rates are crimping profits from lending. New regulations have extinguished old sources of revenue, and compliance is expensive. The cuts also reflect advances in technology that have made bank tellers more expendable.
Steven Mann, the chairman of the finance department at the University of South Carolina’s Moore School of Business, said many of his students have given up on banking jobs.
“In 2005, 2006, 2007, I’d ask, ‘Do you want to go work at a bank?’ and the answer was always yes,” he said. “Now the answer is no one. They want to be in the treasury department of General Electric.”
It’s a far different mood from the pre-crisis years that were fueled by risky trading and complicated investments. In 2004, 2005 and 2006, banks added more than 50,000 jobs per year.
Now Citigroup is cutting back in lower-growth countries, like Greece and Spain. Germany’s Commerzbank and others are laying off branch workers as customers gravitate toward online banking. Barclays is exiting businesses with “reputational risks” after some of its bankers were caught manipulating global interest rates.
Even JPMorgan, generally considered one of the nation’s strongest banks, is retrenching. It will cut a net of 17,000 positions, or 6.5 percent of its staff, over the next two years, mostly in the unit that deals with troubled mortgages.
Banks have always cut and added jobs to navigate the varying fortunes of the economy. So it’s difficult to discern whether the industry is permanently shrinking, or if this is just a temporary downward move in a cycle that will turn around again.
“It’s just hard to know how things will shake out,” says Phillip Swagel, a Treasury official in the Bush administration who now teaches economics at the University of Maryland.
To be sure, there are places where the banks are expanding. Wealth management is a hot area because it can provide a steady source of income, based mostly on fees, rather than the spectacular gains — and losses — of trading. Banks are also rushing to hire compliance workers, to help ensure they’re in line with stricter regulations that came out of the financial crisis.
“There are three or four federal regulatory bodies that could walk into a bank store at any moment,” says Marc Hutto, founder of recruitment firm Reveal Global Intelligence in Charlotte, N.C. “Banks are hiring as fast as they can for these audit and compliance roles.”
Among the recent announcements:
- CUTTING COSTS: Bank of America has been trimming staff under a program announced in 2011 called “Project New BAC,” which includes slashing 30,000 jobs, or 10 percent of its workforce. Morgan Stanley has been trimming jobs under its “Office of Re-engineering.” The latest round in January homed in on investment banking and senior-ranking workers, with the bank slashing 1,600 jobs, or nearly 3 percent of the workforce.
- SLIMMING DOWN: Switzerland’s UBS has been cutting jobs and saying it wants to create a simpler bank, which includes getting rid of “excess management layers.” In investment banking, it has shaken up the top ranks and exited businesses “that have been rendered uneconomical by changes in regulation and market developments.”
- UNDER NEW MANAGEMENT: In December, less than two months after Corbat took over as CEO, Citigroup announced it would cut 11,000 jobs, or about 4 percent of its total. The bulk comes from consumer banking, but the investment bank and operations and technology have also been hit. Corbat likes to say that the bank will be a “maniacal allocator of resources.”
- MORTGAGES IMPROVING: As mortgage losses stabilize, Bank of America and JPMorgan Chase have slashed the units that service troubled home loans.
- REPLACING TELLERS: Most big banks are cutting branches because they’re expensive to maintain and customers don’t visit as often. For the branches that remain, new technology is making human tellers less necessary, with machines counting cash and ATMs dispensing exact change. JPMorgan, Netherlands-based ING and others are cutting positions in their branches as customers get increasingly comfortable banking online or by smartphone.
If there’s no pattern to the job cuts, they are knitted together by a common theme of the industry’s shifting landscape.
Antony Jenkins, appointed CEO of Barclays last year after the bank’s interest rate-fixing scandal, in February laid out a turnaround plan that included exiting risky businesses, cutting jobs and slashing the proportion of revenue that the bank spends on salaries and bonuses.
“We need to accept,” he says, “that society’s expectations have changed.”