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Financial research firm says cuts will appear over
12 to 18 months as subprime crisis hits other areas of the banking
industry.
Last Updated: April 1, 2008: 1:55 PM EDT
GENEVA (AP) -- 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 they expect the U.S. commercial banking industry -
essentially, all companies that lend or collect deposits - to lose
200,000 of its two 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 (UBS) - 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. (BSC, Fortune 500) has 14,000
staffers, and JPMorgan Chase & Co (JPM, Fortune 500)., the company
buying the investment bank, has not yet announced how much of that
staff it intends to keep. Meanwhile, Citigroup Inc. (C, Fortune 500)
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." To top of page
First Published: April 1, 2008: 7:06 AM EDT
