European banks are preparing a fresh round of bloodletting — with some 20,000 jobs set to go — as tougher rules and negative interest rates weigh on profits.
ING Groep NV will slash 5,800 positions over five years as it focuses on internet and mobile banking and automates systems, the Amsterdam-based lender said Monday. Last week, Germany’s Commerzbank AG disclosed plans to cut 9,600 jobs, while Spain’s Banco Popular Espanol SA said it will eliminate as many as 3,000 posts after tapping investors for funds. “Banks are facing high regulatory costs and competition on margins and pricing due to the low-rate environment,” said Karim Bertoni, a fund manager at Bellevue Asset Management in Switzerland, which has about 6.9 billion Swiss francs ($7 billion) under management. “They are trying to reduce costs and people are one of the biggest parts of that.”
The announcements herald the latest wave of job cuts at European banks, which have struggled to increase profitability since the global financial crisis and the region’s sovereign-debt debacle. With negative interest rates, volatile markets and tougher capital requirements eroding earnings, some of Europe’s largest lenders have been forced to deepen cost cuts.
Financial firms have seen their value shrink by $280 billion in 2016. They represent about 11 per cent of the Stoxx Europe 600 Index, near the lowest on record and down from a 23 per cent weighing a decade ago. The Bloomberg Europe Banks and Financial Services Index has dropped about 24 per cent this year, with UniCredit SpA down more than 60 per cent.
“You need banks to lend,” David Kelly, chief global strategy at JPMorgan Asset Management, told Bloomberg Television on Monday. “They’re being hammered by first of all these fines and by all the regulation and by the European Central Bank keeping rates so low.”
Deutsche Bank AG is poised to reach an agreement with labour representatives this week that will allow it to eliminate about 1,000 jobs in its home market as part of cost cuts it announced last year, said people with knowledge of the matter. As part of the overhaul announced in October 2015, Chief Executive Officer John Cryan plans to eliminate 9,000 jobs, or about 9 per cent of the global workforce, including 4,000 positions in Germany.
ING expects to save about 900 million euros ($1 billion) a year through its job-cutting program, while investing about 800 million euros in digital technology. It’s biggest Dutch rival, ABN Amro Group NV, said last month that it would eliminate as many as 1,375 jobs, or 6 per cent of the workforce, through 2020.
At Commerzbank, Germany’s second-largest bank, CEO Martin Zielke plans to trim about one in five jobs, suspend dividends and shrink securities trading in the biggest overhaul since the lender’s bailout during the financial crisis.
Headcount across 26 European, Swiss and Nordic banks has fallen by more than 150,000 to 2.1 million staff since the end of 2007, according to data compiled by Bloomberg Intelligence in May. A lot of the cuts were necessary “because of the overly fragmented nature of Euro-area banks,” Bloomberg Intelligence analysts Jonathan Tyce and Arjun Bowry wrote on Monday.