British bankers are bracing themselves for the largest round of job cuts since the height of the Eurozone sovereign debt crisis as banks struggle to find their way back to profitability and optimism over future earnings shrinks.
Bankers fear the axe is set to fall mostly on bloated back office operations, IT departments and in the head office, with investment banking divisions also anticipating a small reduction.
The number of bankers expecting job cuts has risen by 50 per cent on last year, with 56 per cent of those surveyed by accounting giant EY now warning of the biggest net reduction in staff since 2012.
“The challenge for banks at the moment is how they’re going to become profitable again. In Europe banks need to cut costs by around 30 per cent to reach the one per cent return on equity bankers are expecting in 2016,” Karl Meekings, EY’s global banking and capital markets lead analyst told City A.M. “Clearly they can’t just cut their way into profit.”
The outlook for pay rises is almost as bleak, as bean counters try and eke out savings. Over half of UK bankers have predicted a drop in net pay for the year.
Piling on the misery, top banking regulator William Coen last night warned future banking regulation will focus on corporate governance and IT systems possibly forcing banks to spend further.
Speaking at the AFR Banking and Wealth Summit the secretary general of the Basel Committee on banking supervision warned reforms to corporate governance are “critical in terms of a bank’s risk awareness, risk-taking behaviour and risk management,” adding “bank’s risk data aggregation capabilities have been a source of concern for the committee for some time”.