By Clare Hutchison
LONDON (Reuters) - The banking sector's long and painful restructuring accounted for a further 1.2 percent fall in staff numbers at Europe's biggest lenders in the first half of the year, data compiled by Reuters shows, with little prospect of an upturn any time soon.
Forced to hold more capital against risky assets since the imposition of new regulations after the financial crisis, Europe's top lenders have been shrinking steadily to counter the resulting loss of profitability in some areas of their business while a crackdown on proprietary trading has cut off a valuable source of supplementary revenue.
Of the 25 of Europe's 30 largest listed banks that disclose employee numbers for the six months to the end of June, including Barclays (L:BARC), Deutsche Bank (De:DBKGn) and UBS (VX:UBSN), headcount fell at 16. Though nine of the banks added staff, total jobs across the group fell by 21,135.
About half of the drop is attributable to Dutch lender ING (AS:ING) no longer including Indian offshoot ING Vysya Bank in its headcount figures, but it remains clear that banks are becoming less significant employers.
The trend is even more pronounced in the United States, where the four biggest banks by assets - JPMorgan (N:JPM), Bank of America (N:BAC), Citi (N:C) and Wells Fargo (N:WFC) - cut 23,300 jobs in the first half of the year. That takes the total for the past 12 months to more than 52,000 - about 5 percent of their combined workforce.
The pace of decline in Europe was slightly slower than in 2013 when the 25 banks together cut about 63,000 jobs over the full year, but financial services recruiters say that more swingeing cuts cannot be ruled out.
"Banks in 2014 do not hesitate to shut down businesses that are loss-making ... there's (no longer) any shame in that," said Jason Kennedy, chief executive of Kennedy Group, a recruitment firm specialising in investment banking and hedge funds.
"New-age banks have fewer people, less product and are less profitable."
Calculations by Reuters show that while European banks improved their balance sheets by 530 million euros (424.21 million pounds) in the first half, profitability remained well below targets.
VICIOUS CIRCLE
Royal Bank of Scotland (L:RBS), which was bailed out by the British government in 2008, made some of the deepest cuts. Its workforce shrank by 5,000 as it reduced the number of contractors it employs, streamlined operations and sold the Chicago-based division of its U.S. bank Citizens.
Recruiters said that most job cuts have come in investment banking, which has been hit hard by the tougher capital rules and low interest rates.
British lender Barclays has axed 2,700 jobs at its investment bank this year as part of a wider cull of 19,000 roles over three years.
Back-office roles also remain at risk, while greater use of mobile banking poses a threat to branch staff. Deutsche Bank analysts have forecast that Britain will need only 500 bank branches in 10 years' time. Britain's six largest banks currently have nearly 8,000 branches.
Recruitment specialist Kennedy says that job losses could be exacerbated by a recent focus on cuts at managing director level. He says that such moves limit promotion prospects and, combined with an EU bonus cap, sap motivation and productivity, making further cuts more likely.
"(Bankers) think, 'I'm not going to get paid any more if I work 20 hours (a day) ... why should I go crazy?' Revenues are coming down because of that and it's a vicious circle," he said.
Even if the economic outlook picks up, banks are unlikely to go on any hiring sprees as they adust to the new shape of their organisations and keep a wary eye on market volatility caused by wider geopolitical concerns, such as the situation in Ukraine.
"I would like to think by the early part of next year we're probably going to start to see some forward momentum, however... it's still a little bit of a crystal ball way of seeing things," said Miles Stribbling, a director at recruitment firm Phaidon International.
Those that bucked the trend by hiring staff were likely to have done so to beef up regulatory compliance functions, Stribbling said.
Nordea (ST:NDA), the Nordic region's biggest lender, strengthened its IT services with almost 300 extra staff and Sweden's Swedbank (ST:SWEDa) boosted headcount by 417 to expand advisory services for bond issues and corporate finance.
(Additional reporting by Laura Noonan, Olivia Hardy and Steve Slater; Editing by David Goodman)