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Celent: 200,000 US Banking Jobs at Risk •
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US Subprime Crisis to Claim 200,000 Bank Jobs
By Tom Bawden
The Times UK
Wednesday 02 April 2008
New York - Commercial banks will cut a record 200,000 US jobs in the next 12 to 18 months
to reduce costs as the credit crunch continues to wreak havoc on the bottom
lines of some of the world's most prestigious financial institutions.
Celent, the financial research firm, said that one in 10 jobs in the US commercial
banking industry will be lost as the write-downs from sub-prime investments
pollute the entire banking system.
Octavio Marenzi, head of Celent's financial consultancy unit, said: "The
banking industry over the past 40 years has never seen a downturn in its revenue
growth. In 2008, it looks like it will decrease for the first time in living
memory. They're going to have to respond with severe cost cutting. It's not
an environment they're entirely used to."
The expected future job cuts compare to the record 153,000 redundancies implemented
across the US financial services industry in 2007, more than half of them relating
to mortgages.
However, the 2007 figure includes securities firms, which employ about 800,000
people in the US and have taken the biggest hits from the sub-prime crisis,
whereas Celent's latest estimate does not, Mr Marenzi said.
Most American banks have already cut hundreds, if not thousands, of jobs since
the credit crunch took hold last summer, with Citigroup staff among the biggest
casualties.
In the past year, Citigroup has announced over 20,000 job cuts and there is
understood to be at least 2,000 more to come.
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Celent: 200,000 US Banking Jobs at Risk
By Madlen Read
The Associated Press
Wednesday 02 April 2008
New York - The U.S. financial industry has been shedding jobs at a record clip,
and some analysts predict the pace will only accelerate over the next year-and-a-half
as banks cut costs in the face of the housing market slump and the weak economy.
Analysts at the financial research firm Celent LLC said in a report Tuesday
that it expects the U.S. commercial banking industry - essentially, all
companies that lend or collect deposits - to lose 200,000 of its 2 million
jobs over the next 12 to 18 months.
An annual loss of 200,000 jobs at the nation's commercial banks would be an
unprecedented number.
In 2007, the entire financial services sector - which consists of mostly
commercial banks - announced job cuts that totaled a record 153,000, according
to the job placement consultancy Challenger, Gray & Christmas, Inc. More
than half of those cuts were in the mortgage-lending business, and occurred
all over the country, particularly in New York and California.
Octavio Marenzi, the head of Celent's financial consultancy unit, said more
layoffs are inevitable as the subprime crisis hits other parts of the banking
industry and spreads beyond mortgages to mortgage-related products, such as
home-equity loans, and other types of lending, such as credit cards.
"The banking industry over the past 40 years has never seen a downturn
in its revenue growth," Marenzi said. "In 2008, it looks like it will
decrease for the first time in living memory. They're going to have to respond
with severe cost cutting. It's not an environment they're entirely used to."
The credit crisis began in earnest last summer when the markets tightened up
at the sight of spiking subprime mortgage defaults.
"There's no horizon yet that anybody can see," said John Challenger,
who runs Challenger, Gray & Christmas. "New events keep rolling out
... suggesting that there's more to come."
Financial services companies announced in January that they were cutting 16,000
U.S. jobs, and companies said in February they were trimming 6,000 more, Challenger
said. Those figures are below last year's peak in August when companies announced
they were cutting nearly 36,000 jobs, but analysts expect further bloodletting
in the coming months.
Many banks that have reported huge losses have so far not announced significant
layoffs outside the mortgage area, Challenger added. Just Tuesday, Swiss bank
UBS AG - which has a big portion of its staff in the United States -
said it lost more than $12 billion in the first quarter.
And Celent's estimate does not include the securities industry, which currently
employs some 800,000 people - more than it ever has, after a multiyear
hiring spree, Marenzi said.
The investment bank Bear Stearns Cos. has 14,000 staffers, and JPMorgan Chase
& Co., the company buying the investment bank, has not yet announced how
much of that staff it intends to keep. Meanwhile, Citigroup Inc. officially
announced in January it was cutting 4,200 jobs globally, mostly in its investment
banking business, but said there are more layoffs to come.
"What we haven't seen are big mega-layoffs - tens of thousands of
people in a large company," Challenger said. "It just feels to me
there are big ones coming."
The banking industry is not the only one shedding jobs recently. Manufacturing
and construction companies have been laying off workers for a couple years now
amid the flagging housing market and weak automotive industry.
Though financial services employment has been contracting for the past few
months, employment in other sectors - such as wholesale trade, construction
and public administration - have been contracting at a faster pace, said
Anthony Nieves. Nieves is the chairman of the Institute for Supply Management's
survey committee for businesses outside the manufacturing sector.
And hiring does not appear to be at a total standstill in financial services.
JPMorgan, for one, did more hiring than firing last year.
But the financial services industry is large, so its layoffs affect the broader
job market significantly. In February, U.S. employers eliminated more jobs than
they created for the second straight month, according to the Labor Department.
The department releases its March report on Friday, and economists, on average,
are expecting another net loss.
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