It’s really a crisis of their own making. The long years that have followed 2008’s crash have not been enjoyable for most of the west’s financial institutions. Though their bosses continue to rake in pay outs that would make most people blush, banks, asset managers and their ilk are slimmer than they used to be and there’s plenty more potential for further weight loss.
This week we got fresh details of the vast cost cutting that’s going on at two big banks. Yesterday Lloyds told staff about plans to shutter 29 branches this year and cut more than 1,750 jobs as it slims down as part of boss Antonio Horta-Osório’s ambition to drag the retail bank kicking and screaming into the digital world. The Portuguese banker is trying to cut the fat ahead of George Osborne’s final sell-off of the government’s stake in the bank. It will have shed a total of 9,000 workers and 200 branches by 2017.
Meanwhile over in Zurich former Prudential boss Tidjane Thiame is swinging the axe at Credit Suisse. Today the investment bank and asset manager reported its first loss since the financial criss and a whopping CHF2.4bn (£1.6bn in real money) one at that. The news sent Credit Suisse shares down by 13% to a 24-year low, wiping billions off the company’s value.
Thiame’s plan to get things back on track? Cut, cut, cut. ‘Given the particularly challenging environment we face, we decided in the fourth quarter to accelerate the implementation of our cost savings program across the bank,’ he said in a statement (emphasis Credit Suisse’s). The bank is cutting 4,000 jobs and reducing its bonus pool by 11% in a bid to get lean.
Plenty of others are in the same boat as Lloyds and Credit Suisse, from Standard Chartered to RBS, and the pain isn’t set to relent any time soon. China’s slowdown and the subsequent impact on equity markets, the slump in commodity prices and ongoing jitters across the Eurozone paint a tricky economic backdrop (plus who knows when the next property crash is going to come along?).
And the world’s big financial institutions face challenges on their own doorsteps too as challenger banks and financial technology (fintech) start-ups create new ways of doing business. The likes of Atom Bank are promising to do away with the need for bank branches. Nutmeg wants to do traditional asset managers out of a job and crowdfunding websites want to play a bigger role in raising corporate funding.
Of course some banks have and will adopt these new technologies and ways of operating. Consumer mobile banking apps are a good example of an area where the likes of RBS and Lloyds have done a decent job of, if not staying ahead of the curve, keeping within touching distance of it. But big changes are afoot and MT won’t be surprised to see more waves of job (and bonus) cuts on the way in the coming years.