Banks urged to shrink to boost profit

INVESTMENT banks should curtail their post financial crisis expansion and shrink their services to boost profitability, according to a report out today.

Almost 50 per cent of 170 interim managers working in the financial services sector believe investment banks need to cut poorly performing product lines or services, the survey by consultancy firm Interim Partners finds.

Interim managers are senior consultants hired by banks on a short term basis at board level or just below.

Only four per cent of those surveyed said investment banks should expand, with just two per cent calling for aggressive expansion through mergers and acquisitions.

Meanwhile, retail banks are advised to grow, the report claims.

Retail and commercial lenders are the most likely to take on more staff over the next year, according to those surveyed.

“Investment banks have bounced back well from the credit crunch and are once again competing with each other for staff. However, there is a concern that their return on equity is not as high as it should be,” said Andrew McIntee, director of financial services at Interim Partners.

“Interim managers say that investment banks should be more ruthless with poorly performing business units and cut them in a bid to recover the high profitability they achieved before the financial crisis,” he added.