European banks reduce jobs as debt crisis ends 'years of plenty'
European banks are accelerating jobs cuts as the region's debt crisis shrinks revenue and regulators force financial firms to bolster capital.
Credit Suisse Group AG, Switzerland's second-biggest bank, said today it will eliminate about 1,500 jobs, adding to the 2,000 staff cuts the Zurich-based lender announced in July. Danske Bank A/S, Denmark's largest lender, will also trim 2,000 posts. Barclays Plc Chief Executive Officer Robert Diamond said yesterday the London-based bank had eliminated 3,500 positions this year and that the trend will continue.
European banks may be forced to eliminate more positions as the sovereign debt crisis erodes earnings and higher capital requirements imposed by regulators force lenders to sell assets and shrink their balance sheets. West European banks have cut more than twice the number of jobs as their U.S. peers, eliminating 86,273 positions this year, compared with 36,951 in North America, according to data compiled Bloomberg Industries.
“The years of plenty are well and truly behind us,” said John Purcell, founder of executive search firm Purcell & Co. in London. “Old models and underlying beliefs are being fundamentally examined. It's a once-in-a-generation challenge.”
Credit Suisse, UBS AG, Deutsche Bank AG and Barclays have already disclosed plans to shrink their combined risk-weighted assets by as much as $415 billion to prepare for the stricter capital requirements under the Basel III rules, filings show.
‘Losses Are Inevitable'
“Further job losses are inevitable as banks continue to try to be proactive in dealing with the worsening climate and the concerns that the current market and economic malaise is likely to continue for an extended period,” said Christopher Wheeler, a London-based analyst with Mediobanca SpA.
Credit Suisse Chief Executive Officer Brady Dougan, 52, said today volatility in the markets is “similar” to the 2008 crisis. He is cutting jobs and reorganizing the lender's securities unit after the division reported its first quarterly loss since 2008.
At Barclays, headcount fell “about 3,500” so far this year, Diamond told reporters on a conference call yesterday. “There's no specific headcount plan. In think what you'll see is a continuation of the kind of trends you've seen,” he said.
Danske is cutting jobs to reduce costs by 2 billion kroner ($368 million) over the next three years, the Copenhagen-based bank said today after it reported its first quarterly loss since the height of the crisis more than two years ago.
Nomura Holdings Inc., which swung to a bigger-than- estimated third-quarter loss, today said it will speed up cost cuts as income from trading and investment banking fell. Chief Executive Officer Kenichi Watanabe said he will focus the reductions on wholesale operations in Europe.
‘Difficult to Make Money'
“The significant duration and long-term nature of the economic downturn is causing some banks to rethink their business,” said Andrew Gray, banking leader at accounting firm PricewaterhouseCoopers partner in London. “In an environment which remains one of very low economic growth and very low interest rates, banks are finding it very difficult to make money.”
UBS, Switzerland's biggest bank, and Deutsche Bank, Germany's biggest, last week signaled more jobs may be at risk.
Deutsche Bank Chief Financial Officer Stefan Krause said Oct. 25 the Frankfurt-based lender will continue to adjust its “platform” if the challenging environment persists. The bank announced 500 job cuts earlier that month.
His counterpart at UBS, Tom Naratil, said the same day that his firm's plans to reorganize its investment bank may lead to a lower headcount at the unit, though that won't necessarily entail job cuts. The Zurich-based company plans to announce the details of the plan on Nov. 17.
UBS may announce a further 1,700 job cuts at the investment bank, as well as an additional reduction in risk-weighted assets of 70 billion francs ($78.7 billion) on top of about 100 billion francs it had planned to cut to comply with the stricter Basel III capital rules, JPMorgan Chase & Co. analyst Kian Abouhossein said in an Oct. 20.