Amid difficult business and many uncertainties, large banks all over the world save costs by laying off staff and using AI.
Deutsche Bank has just announced plans to cut 3,500 employees, accounting for 4 per cent of all its workforce, to accelerate its plan of reducing costs by €2.5 billion ($2.7 billion) by 2025, according to CNN. To promote simplified and automated workflows, most of the positions being cut are in office and support departments.
In 2023, Deutsche Bank's pre-tax profit increased by 2 per cent compared to 2022, to €5.7 billion ($6.1 billion) - the highest level over the last 16 years. However, net profit fell 14 per cent to $5.3 billion. Deutsche Bank is the latest of numerous banks to announce lay-offs in recent months to reduce costs and increase profits.
UBS is also laying off 3,000 employees in Switzerland - where this bank is headquartered. Other branches of this bank are expected to have similar moves.
Citibank - America's third-largest bank - last month confirmed to cut 20,000 jobs in the next two years, equivalent to 10 per cent of all global employment, to save $2.5 billion in the long term.
January has been the time that the US financial industry cut the most staff since September 2018, 23,238 people were laid off, according to recruitment company Challenger, Gray & Christmas.
The round of lay-off announcements in early 2024 continues a year of massive downsizing in the global financial industry. According to the Financial Times, big banks around the world cut more than 60,000 jobs in 2023, marking one of the biggest years of labour cuts since the financial crisis.
Citibank started laying off employees in November 2023, before the recent official announcement. At the same time, in the UK, numerous banks like Barclays, Lloyds, and Metro Bank simultaneously announced a reduction.
Banks are applying automation and AI as a reason to reduce the number of employees. For example, Lloyds is eliminating certain roles and further hiring for data and technology candidates. Moreover, the reduction in headcount is also a preparation for a more difficult business environment as rising interest rates impact the economy. And lower interest rates could also erode profits as lending becomes less profitable.
Deutsche Bank said to increase its bad debt provision by €300 million, to €1.5 billion in 2023, due to the continued challenging impact of interest rate and macroeconomics conditions.
Investment banks saved on human resources costs last year and are expected to continue to downsize their teams. UK economists said that there are uncertainties, no investment or growth in most banks, so there is likely to be more job cuts, according to overseas media.
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