Many former bankers will ‘have to find something completely different’
The job cuts announced by the banking industry as it restructures itself are so vast, many of those formerly working in the field–particularly in Europe–will find themselves pursuing alternate careers in the years to come. And while most of the cuts so far have come in Europe, the U.S. is on track to follow, say analysts.
Reuters reported Friday that job cuts announced by some 29 banks since the beginning of 2011–some 160,000 of them–have hit Europe far harder than Asia or the U.S. But, hard as that has already been, particularly on Britain where the financial industry accounts for about 10% of the economy, that could change as the full tally of slashed jobs in the sector has yet to be revealed.
The 160,000 positions already announced as being on the chopping block are far from the end, with many banks not having revealed the full toll of their changes. Also, numerous smaller firms, banks and brokers both, also either downsizing or closing. Commerzbank, for instance, was reported to be planning another 6,000 job eliminations, although in the report it had declined to confirm that.
And Swiss-based UBS said in October that it intended to lay off an additional 10,000; that would come on top of the 3,500 job cuts it had said in 2011 that it would make. The bank also said last month that it had decided to exit most of its rates and debt trading units.
With the number of new hires being outnumbered by those on their way out the door by a two-to-one margin, many in the field will be looking elsewhere for new careers. One top executive at an international bank based in London, who asked for anonymity, was quoted saying, “When I let go tons of people in cash equities this year, I knew most would be finished in this business. It is pretty dead. Some will just have to find something completely different to do.”
Zaheer Ebrahim at recruiters Kennedy Group said in the report, “It is structural as well as in response to cycles in the market. The market is still over-broked.” And it is still looking to cut costs.
Caio Gilberti, from the financial services practice of consultancy AlixPartners, seemed to agree, and was quoted saying, “There are still 300,000 too many full-time employees in the top financial services players in Europe.” Gilberti added that if those additional positions were eliminated, banks’ collective cost base could be cut by just a bit more than 20 billion euros ($25.470 billion).
However, if most of the cuts have come so far in Europe, that doesn’t mean the U.S. financial industry is immune. Sanford C. Bernstein analysts led by Brad Hintz and Chirantan Barua said in a Bloomberg report that Wall Street firms will also have to drastically cut both pay and headcount, as well as divesting of nearly a third of their trading business assets to be able to keep earning even half the returns they formerly made.
“This implies that the industry is likely to shrink, and more firms will ultimately need to follow UBS to the exit,” the analysts wrote in a report. “Over the next few years we expect rampant consolidation.”
They added, “We believe the advantages of scale, technological efficiency, and trading discipline will become increasingly important, particularly to firms attempting to be among the last standing.”