Major banks have announced some 160,000 job cuts since early last year and with more lay-offs to come as the industry restructures, many will leave the shrinking sector for good as redundancies outpace new hires by roughly two-to-one.
Reuters reports that an analysis of job cuts announced by 29 major banks showed the lay-offs were much bigger in Europe than in Asia or the United States. That is a particular blow to Britain where the finance industry makes up roughly 10% percent of the economy.
The tally of nearly 160,000 job cut plans, meanwhile, is likely to be a conservative estimate as smaller banks and brokers are also cutting staff or shutting up shop, and bigger banks have not always disclosed target numbers of lay-offs.
'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', said one top executive at an international bank in London, on condition of anonymity.
In the meantime, Bloomberg reports that Wall Street firms must slash pay and headcount and shed almost a third of their trading-business assets to earn even half the returns they once made, according to Sanford C. Bernstein analysts.
So-called risk-weighted assets at U.S. banks have to shrink 33% and European lenders must slice 28%, Bernstein analysts led by Brad Hintz and Chirantan Barua wrote in a note to clients today. The firms also must cut their compensation ratio to 40% of revenue from 50% by firing high- paid managing directors and replacing some traders with computers, they wrote.
'This implies that the industry is likely to shrink, and more firms will ultimately need to follow UBS to the exit', the analysts wrote, referring to the decision last month by UBS AG (UBSN) to scale back its trading businesses. 'Over the next few years we expect rampant consolidation'.