[SYDNEY] After two years of adding jobs, Australia's largest banks are joining global competitors and trimming staff as earnings falter following six consecutive years of record profits.
The four-largest lenders and Macquarie Group cut a combined 1,475 jobs in their respective half yearly periods to reduce costs as increased competition and regulation eat into their profitability. The job reductions are the most since the lenders shed 3,300 roles in the second half of 2012, according to regulatory filings.
Banks worldwide are cutting positions amid a multi-year slowdown in trading revenue and increased compliance costs. Deutsche Bank AG, Standard Chartered Plc and Credit Suisse Group AG have announced they will slash almost 50,000 staff.
While Australian lenders bucked the global trend and added jobs from late 2013 to the start of this year as mortgage demand soared, they are now facing a slowdown in profit growth as capital requirements increase, forcing them to reverse course and join their global rivals.
"In a period of low credit growth, the focus will be on cost and staff productivity," David Ellis, a Sydney-based analyst at Morningstar Inc. said by phone. "That is one of the few ways by which they can try to maintain profits amid macro headwinds." Ellis said there will be further reductions in headcount as Australian banks shrink branches, outsource back office functions and automate processes. "While it won't be slash and burn, job cuts will be an ongoing focus."
Westpac Banking Corp, the country's second-largest lender by market value, posted a 3 per cent increase in cash profit to A$7.82 billion in the year ended Sept. 30, the weakest pace since 2009. Australia & New Zealand Banking Group Ltd. reported its slowest profit growth in seven years, while Commonwealth Bank of Australia, which has a June fiscal year, had the smallest annual expansion since 2012.
Standard Chartered said last week it plans to cut 15,000 jobs by 2018. Deutsche Bank and Credit Suisse have outlined in recent weeks plans to eliminate a combined 32,000 positions.
Australian lenders have raised almost A$20 billion this year after regulators increased minimum capital level requirements to ensure the banks are protected in the event of any downturn in the housing market. They have also increased mortgage rates, blaming the cost of setting aside more money.
The tighter regulation and increased competition is hurting lenders' net interest margins, a measure of lending profitability. National Australia's net interest margin fell to a record low of 1.87 per cent in the 12 months ended September. The measure fell 9 basis points to 2.04 per cent at ANZ.
Australian banks' average cost to income ratio, used to gauge efficiency, decreased to 45.3 per cent in 2015 from 45.6 per cent a year earlier, KPMG said in a note summarising the earnings of the lenders. Still, "with continued pressure on margins impacting earnings, focus needs to be firmly on cost efficiency," it said.