In 2013 and 2014, a Reuters data report shows that Europe’s ten biggest banks announced staff cuts of 130,000 and since June, a number more than the total number of job losses were announced by the same banks in 2013 and 2014.
Regulation, anemic economic growth and technology changes will force banks across Europe to find more savings in 2016 and jobs are likely to be lost so as to make more profits.
According to Jasper Lawler, a market analyst at CMC, banks are not designed to cope with a zero-interest rate environment.
We've obviously had the first interest-rate hike in the US - that's the first one in what is expected to be four next year.
“They still have, particularly in Europe, a lot of bad loans on the books, and so they’re hesitant to loan as typical source of revenue and profits aren’t there,” he said.
Tens of thousands of staff were axed during and after the 2007/09 financial crisis but the fresh wave of cuts in Europe shows how the region’s banks are trailing their U.S. counterparts in bringing in structural overhauls.
Some 78,000 job cuts were announced in 2013 and 2014 at eighteen of Europe’s largest banks, which represented 4.1 percent of staff, far less than cuts of 7.3 percent in headcount across six major U.S. banks.
Some cuts will come from selling off businesses as new technology is also contributing to banks closing branches and shifting to systems requiring less manpower.
While the U.S. Federal Reserve has begun raising interest rates, its counterpart in Europe is contemplating further monetary easing, which could eat into banks’ interest margins.
“In terms of share-price performance, part of it reflects just the different interest-rate environment,” Lawler said.
At Morgan Stanley, analysts predict that European banks who make quick cuts to their headcount and business lines could pull their returns closer to their U.S. peers by 2017.