Are our big four banks going to get smaller?
Representatives of workers and industry analysts fear pressure from increased compliance and technology costs may push Australia’s biggest banks to trim their workforces.
“The most significant part of banks’ expenses is staff expenses, being head count, the number of people employed,” Shaw and Partners senior analyst Brett Le Mesurier said.
“You can expect that’s going to fall – the only question is, how significant will the falls be?”
The nation’s most valuable listed company, the Commonwealth Bank, shot down a report in The Australian earlier this year predicting it would shut 300 branches and cut 10,000 jobs.
Questioned about the report, the bank pointed to a recent speech by chief executive Matt Comyn at the Trans-Tasman Business Circle.
“We have more than 48,000 employees. We have added large numbers of people into our compliance, risk, financial crimes area,” Mr Comyn told the forum.
“We have a large team of people helping to accelerate the remediation program.
“And while we continue to recruit about 6000 people per annum, we do expect that over time the shape and size of the organisation will adjust to ensure that we retain the most important aspects of what the Commonwealth Bank is.”
Banks are thousands of staff off peak levels
While no bank has announced substantial cuts, the workforces of the big four have seen fluctuations over the past decade since the global financial crisis.
Acquisitions, divestments and changes in technology and strategy have all caused impacts on staff numbers. The data here is derived from the annual reports of the institutions.
In 2008, the Commonwealth Bank employed 39,621 full-time equivalent employees, a number that rose to 46,000 four years ago, before falling back to 43,771 last year.
In the same period, Westpac’s workforce shot up from 26,000 to as high as 40,000 three years ago following the takeover of St George Bank, before falling to its current level of 35,000.
ANZ’s staff levels also fluctuated wildly: From 36,925 in 2008 up to more than 50,000 in 2014 and 2015, before the unwinding of its desire to be a “super regional” bank in the Asia-Pacific area. Last year it had 39,924 full-time equivalent staff.
By market capitalisation – the value of a company’s shares multiplied by the number on offer – NAB is the smallest of the nation’s largest banks. From a decade ago, when NAB had 39,729 staff, it rose to almost 45,000 by 2011, falling back to 33,283 by the time of last year’s annual report. Over that period, NAB sloughed off its troubled UK banking business.
Under the ‘Four Pillars’ policy, the federal government will reject any potential merger or acquisition between the Commonwealth Bank, Westpac, ANZ and NAB.
In November 2017, NAB announced it was retrenching 6000 staff over several years – one in every five members of its workforce – the same day the bank revealed a $5.3 billion annual net profit. At the time it was considered the crest of a digital wave flooding through banks.
In a statement, NAB said its 2017 announcement was part of a broader transformation of the company, and included assistance for people losing their jobs to find training and employment outside of the institutions.
“In 2017, NAB announced we would reshape our workforce to better deliver for our customers and, by financial year 2020, expected to create up to 2000 new jobs while about 6000 roles would be impacted as we further automate and simplify our business,” the bank responded.
As per our half-year 2019 results, NAB confirms our transformation program, including these workforce changes, remains on track. NAB is committed to being open with our people, and treating them with care and respect.’’
Since then, increased compliance costs arising out of the royal commission, and the need to invest heavily to keep up with neo-banks and disruptive innovators, have collided with slow growth in the bank’s income, increasing pressure on the bottom line.
‘Algorithmed’ out of a job
Spiralling investment in technology has created opportunities for banks, but the impact has been felt by staff.
Former NAB banker Peter Chung felt “algorithmed” out of a job when we first spoke to him in early 2018.
“I’d say [technology] reduced the size of jobs, the contents of jobs and, therefore, at the end of the day, the number of jobs available,” he said at the time.
NAB has since hired more than 2000 staff, almost exclusively in roles dealing with new technology, like augmented reality, artificial intelligence and machine learning.
More than a year on, Mr Chung has embraced retirement.
He is learning two languages, exercising daily and attending adult education classes in writing and painting.
But discussions with his colleagues paint a grim picture of the near future.
“I think generally for those who are still there … the general opinion was that it is getting harder,” he said.
“The cutbacks are not going to stop, volume is seen to be down. My ex-employer is under pressure in terms of the changes coming through, so it’s only going to get harder, and fewer people will be employed, either due to technology or restructuring or whatever.”
Mr Le Mesurier agrees.
“I think the workforces of the big four will continue to shrink,” he said.
“Obviously NAB’s decline is going to be the most significant.
Revenue growth has been a problem for all the banks, so that puts pressure on costs … and pressure on costs means people are going to lose their jobs.’’
Between 1 to 2 per cent of each institution’s workforce is in the firing line each year, according to the long-time industry watcher.
“When you think about the number of people involved, being that they employ 40,000 or 50,000 people, a 1 per cent reduction is 400-500 people losing their jobs at each bank [every year] … so there’s a lot of people that can be adversely affected by this.”
‘You don’t restore trust by closing branches’
Former New South Wales premier Nathan Rees, who now represents workers in the sector as the national assistant secretary of the Finance Sector Union, said increased training was the key to better compliance, and a rosier return for customers and shareholders.
“Technology and the rate of innovation is hitting the finance sector harder and more quickly than almost any other sector, perhaps aside from transport and logistics,” he said.
“We know these charges are going to occur. We know that there are going to be fundamental changes to the way services are delivered, and that means that banks have a requirement and an obligation to train their staff, to treat their staff fairly in the transition.”
After a horror year at the royal commission, where scandals were exposed that showed lax checks on charging customers leading to billions of dollars robbed from Australians, Mr Rees said the big four needed to demonstrate they could be trusted again.
“Fundamental to the restoration of trust of the Australian public in the finance sector is the willingness of banks to treat their staff and their communities fairly,” he said.
You don’t rebuild trust by introducing robo-advice, you don’t restore trust by not passing on each interest rate cut, and you certainly don’t restore trust by closing branches.’’
Former bankers like Mr Chung said chronic underinvestment in internal training and development, across all of the big four, has led to expensive short-term fixes and the loss of experienced staff.
“It was almost a case of, ‘It’s cheaper to buy from external companies’, or to go for an outsourced solution, than to retrain your workforce,” he said.
“And there’s no doubt the nature of the jobs has changed over the years, but people adapt to that. People are able to learn new skills.”