‘They are all tightening their belts’: Job cuts in the banking sector mount

3 days ago 4

A series of job cuts by some of Australia’s biggest banks is underlining how technological change and the drive to lift profits is contributing to lay-offs in the banking sector, with Bendigo and Adelaide Bank the latest financial institution to swing the axe.

The Finance Sector Union on Thursday announced Bendigo planned to cut 158 jobs, the vast majority of them technology workers. It followed news on Wednesday that National Australia Bank was cutting 410 jobs, and on Tuesday that ANZ Bank was slashing 3500 jobs.

Several banks have announced job cuts in recent weeks.

The Bendigo job cuts, which are the subject of consultation with the union, are part of a restructuring in the regional bank’s technology division, and NAB’s layoffs this week also targeted the bank’s technology and enterprise operations arm.

Atlas Funds Management chief investment officer Hugh Dive said technology was one of several reasons for the recent job-shedding by Australian banks because when banks upgraded their IT infrastructure, they expected a return from the spending.

A desire to boost profits was also a factor in the recent job-cutting, Dive said, while noting NAB, Westpac and ANZ had relatively new chief executives putting their stamp on those banks.

“They spend a lot of money on technology and there’s a reason why they spend it – it’s not just to pump up the profits of Oracle. They want a return on that,” Dive said.“If you can stop some manual handling in the back office, that’s a good outcome, and that’s what they do.”

Morningstar analyst Nathan Zaia said banks were facing inflation from staff wages, as well as costs from IT infrastructure. Zaia said when banks consolidated their IT systems it could help with risk management and make banks more efficient.

“If you can make each banker be able to write a loan faster, you probably don’t need as many bankers over time,” he said. “We are probably just seeing it happen gradually at the banks. I don’t think we are going to see a sudden step down in the number of people.”

While ANZ’s 3500 job cuts are the deepest in the industry, Westpac has also been culling jobs as part of a push to simplify the bank’s operations under new chief executive Anthony Miller.

Earlier this year, it was reported that Miller had asked managers to consider how they could cut staff numbers by 5 per cent. In contrast, Commonwealth Bank’s Australian staff numbers edged higher last financial year.

Westpac has been culling jobs as part of a push to simplify the bank’s operations under new chief Anthony Miller.

Jarden analyst Matt Wilson said banks were looking to protect profits, which have “not grown much” for the industry, as margins face pressure from declining interest rates.

“There’s just pressure on earnings so they are all tightening their belts … perhaps it also reflects bank management’s view on the outlook for earnings,” Wilson said.

Wilson has previously noted the big-four banks have a “material opportunity” to reduce their cost-to-income ratios – a key measure of performance watched closely by investors.

“I think it’s pretty clear the industry has employed a lot of people,” Wilson said.

The Finance Sector Union said Bendigo’s move to cut jobs was driven by a long-running plan to “optimise” branches and create “efficiencies” through automation, as it warned such changes would lead to poorer customer service.

A Bendigo spokesman pointed to a need to improve productivity and meet customer expectations and said the bank remained committed to consulting with staff.

“To preserve its ability to continue delivering on its purpose for all stakeholders, the Bank continues to explore ways of working that will improve productivity and deliver better customer experiences,” the Bendigo spokesman said.

“The bank reviews all parts of the business regularly and continues to prioritise investment in innovation that supports our business and meets the evolving expectations of our customers.”

The Finance Sector Union said it was taking Bendigo to the Fair Work Commission, alleging the bank did not give affected workers enough information about the change.

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.