Big Banks all over the world are breaking records after laying off tens of thousands of employees, including over 20,000 American workers.
Scotiabank, one of Canada's Big Five banks, announced recently that it is cutting about three percent of its global workforce due to changes to its operations and customers' preferences, along with continuing efforts to streamline operations. The reductions come to about 2,700 jobs, based on the Canadian bank's total personnel of 91,013 employees as of July 31.
The bank said in a statement on Oct. 18 that the restructuring charge, severance provisions and a write-down on an investment in a Chinese bank will total $590 million, or 49 cents a share. The restructuring charges also include the price of exiting real estate and other contracts.
The bank declared impairment charges of $280 million after taxes connected to the bank's investment in Bank of Xi'an Co. Ltd., whose market value has stayed below Scotiabank's carrying value for an extended period, in addition to weakness of specific intangible assets including software.
According to Royal Bank of Canada analyst Darko Mihelic, the expenses should not come as a surprise after a review of Scotiabank's strategic direction.
Five of the largest banks in the U.S. have reduced their workforce by over 20,000 this year
Meanwhile, the biggest American banks have been quietly laying off workers all year with some of the deepest cuts yet to come. (Related: Largest banks in America have collectively cut 20K JOBS so far this year.)
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Even as the economy has surprised forecasters with its resilience, lenders have trimmed headcount or declared plans to do so, with the main exception being JPMorgan Chase, the largest and most profitable bank in the United States.
Pressured by the effect of higher interest rates on the mortgage business, Wall Street deal-making and funding costs, the next five largest U.S. banks have reduced a combined 20,000 positions so far this year, based on company filings.
The moves arrive after a two-year hiring boom during the Wuhan coronavirus (COVID-19) pandemic, caused by a rise in Wall Street activity.
That subsided after the Federal Reserve started increasing interest rates last year to cool an overheated economy, and banks discovered themselves suddenly overmanned for an environment in which fewer consumers asked for mortgages and fewer corporations released debt or bought competitors.
"Banks are cutting costs where they can because things are really uncertain next year," said Chris Marinac, research director at Janney Montgomery Scott.
Job losses in the financial industry could pressure the wider U.S. labor market in 2024.
Faced with surging defaults on corporate and consumer loans, lenders are poised to make deeper cuts next year, according to Marinac.
"They need to find levers to keep earnings from falling further and to free up money for provisions as more loans go bad. By the time we roll into January, you'll hear a lot of companies talking about this," Marinac added.
The deepest cutbacks have been at Wells Fargo and Goldman Sachs, institutions that are battling with revenue downturns in major businesses. They each have trimmed about five percent of their personnel so far this year.
At Wells Fargo, job cuts happened after the bank declared a strategic change away from the mortgage industry in January.
And although the bank reduced 50,000 employees in the past three years as part of CEO Charlie Scharf's cost-cutting plan, the company isn't done decreasing the number of staff, according to executives.
As stated by CFO Mike Santomassimo there are "very few parts of the company" that will be spared from cuts. "We still have additional opportunities to reduce headcount. Attrition has remained low, which will likely result in additional severance expense for actions in 2024," Santomassimo told analysts.
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