[NEW YORK] The bloodletting at banks that started during the 2008 financial crisis isn't letting up.
That's the view of 83 per cent of respondents to a quarterly Bloomberg Global Poll who said the banking industry will continue cutting jobs this year. The reductions will affect firms around the world, 61 per cent said, while 21 per cent said most cuts will be in Europe and 1 percent said they'd be concentrated in the US. Only 8 per cent expected banks to add jobs this year.
In a separate question, 78 per cent of respondents said they didn't expect the largest banks to break up as a result of tougher regulations penalising them for size and complexity.
"Sharp market moves, slow economic recovery, the regulatory burden - all these are restricting banks' operations," said Daniel Baker, a London-based analyst at Informa Global Markets and a poll respondent. "We'll see more job cuts in the sector until things stabilise." Financial firms are struggling to regain their footing years after a US housing-market collapse was followed by a European sovereign-debt crisis. Four of the biggest US and UK banks have reduced total employment by almost 350,000 since the beginning of 2008, according to data compiled by Bloomberg. A weak global recovery and regulations designed to prevent another crisis have dented profitability at the largest firms.
European banks already have announced job cuts this year. London-based Standard Chartered Plc said it would eliminate 4,000 consumer-banking positions. Deutsche Bank AG, based in Frankfurt, is weighing staff reductions and asset sales as part of a strategic review, according to a person with knowledge of the matter.
Citigroup Inc has cut more jobs than any other bank, reducing head count by 133,000 in the past seven years. Most European lenders started cutting after 2010, when the euro area's existence came into question as failing lenders and governments rescuing them got caught in a dangerous spiral.
The poll of 481 investors, analysts and traders who are Bloomberg customers was conducted Jan 14-15 by Selzer & Co, a Des Moines, Iowa-based firm. It has a margin of error of plus or minus 4.5 percentage points.
In response to the question about whether banks will break up, only 13 per cent expected at least one big firm to do so this year. The respondents predicting that banks will remain intact include 58 per cent who said lenders will refine their business models and 20 per cent who said changes won't meaningfully alter those models. Nine per cent said they weren't sure.
Big banks may resist pressure to split as they seek to preserve advantages conferred by size.
"The very cheap financing is due to the government guarantee that makes large banks viable, and that hasn't changed despite all the new rules," said Gyula Lencses, a poll respondent who helps manage US$750 million at the Hungarian unit of Raiffeisen Bank International AG. "To properly manage a breakup is also very hard, so nobody wants to take that risk." The issue came to the forefront this month after a Goldman Sachs Group Inc. report suggested that JPMorgan Chase & Co would be worth more if broken up. Regulations punishing size, such as the US Federal Reserve's proposal to levy a capital surcharge on the top eight US banks, make the economics less and less desirable, Goldman Sachs analysts wrote on Jan 5.
JPMorgan Chief Executive Officer Jamie Dimon, 58, defended the existing model and size during the bank's quarterly earnings conference call a week later. Protesters have staged rallies in front of Citigroup offices, demanding the bank's dismantling.
The tougher rules might force big banks to break up by increasing market pressure, according to Sheila Bair, a former chairman of the Federal Deposit Insurance Corp.
"The more expensive it is to be big, the more market pressure there is going to be to get smaller," Bair said in a television interview this week.