You are currently viewing our desktop site, do you want to visit our Mobile web app instead?
 Registered users can save articles to their personal articles list. Login here or sign up here

Banks continue quietly cutting staff

Structural change from digitisation and branch cuts driving the reductions …

Three of the country’s five largest banks have been quietly cutting staff, particularly in retail units, to drive down stubbornly high cost-to-income ratios. In the past year Absa, Nedbank and Standard Bank have cut over 2 200 staff in their South African operations – across retail, corporate and investment banking (CIB) and wealth units.

Read: Standard Bank to cut around 1 200 jobs, close 91 branches

By contrast, FirstRand and Capitec are adding staff. FirstRand says group headcount increased by 5% to over 47 000, although this number now includes the UK’s Aldermore, acquired last year.

In 2018, Absa reduced headcount by 830 (net) to 30 819, Nedbank by 726 (net) to 28 260 and Standard Bank by 680 (net) to 31 662 in South Africa. The 2 236 decline equates to 2.4% of the total staff complement in the country across the three banks. These reductions are not surprising as efforts to reduce the number of branches (and total physical space occupied) ramp up, and digitisation becomes entrenched.

Nedbank

In its retail and business banking unit, Nedbank reduced headcount by 698 last year, “largely through natural attrition”. At the end of December, this unit had 19 545 employees.

Overall, the bank says “over the past 24 months we reduced total headcount by 1 469 (mainly through natural attrition) and optimised our staffed points of presence by closing 18 branches (while maintaining our coverage of the bankable population at 84%)”.

As part of an ambitious plan to reduce its efficiency (cost-to-income) ratio, it is implementing a “target operating model” that will achieve R1 billion in cumulative savings this year. It has already achieved savings of R680 million. The cuts aren’t only coming in the area of frontline staff, or even in the retail bank, but point to “ongoing headcount reduction” in “back- and middle-office optimisation”.

The bank previously said that software robots could replace up to 3 000 jobs, through natural attrition. CIO Fred Swanepoel told City Press a year ago that “With about 32 000 staff, our natural attrition rate is about 3 000 per year. When we look at a three-year period, we don’t think that robotics will take up more than one year of that natural attrition.”

Absa

Absa says that while staff costs grew 4% on the back of a 7% increase in salaries, group “headcount decreased 2% to 40 856, largely due to reductions in South Africa and a disposal” in its wealth, insurance and investment management unit. It says the increase in salary costs “reflected investment hiring relating to the build-out of new capabilities post separation from Barclays plc”.

In line with its ambition to regain the leadership position in retail banking, it aims to grow ahead of the market from next year. Doing this will help drive its cost-to-income ratio down to the “low 50s” by 2021 from the current level of 58.7.

As part of its restructuring of this unit, discussions between the bank, employees and union Sasbo this month have revealed that 827 jobs are “potentially at risk”. Up to 340 people might reportedly be employed through the process.

In comments to Bloomberg, Absa said: “It is only once the realignment is complete that the total number of people who have either been appointed to new roles or have left the organisation will be known with certainty.” It added that the changes will result in “both new opportunities and redundancies across the business” and described the moves as not a “retrenchment exercise, but a realignment effort aimed at enabling our new strategy”.

Standard Bank

Standard Bank says net headcount for the group declined by approximately 900 people “on the back of a combination of natural attrition, digital efficiencies and management actions”. In Standard Bank South Africa, headcount reduced by 680 (net) to 31 662. It says the increase in staff costs of 4% in 2018 was “attributable to annual salary increases and separation costs in the information technology business”. In November, it said it would cut 526 jobs in the IT division as part of its restructure.

The banks do not disclose the exact same metrics, making direct comparisons difficult. One way to measure efficiency is the headline earnings generated per employee. At all three banks, however, there are distortions from insurance and ‘wealth’-type activities (Standard Bank, via Liberty). The group figures below include Liberty’s earnings contribution without accounting for staff.

Headline earnings per employee

In the South African context, one can see how far ahead of its peers Standard Bank is. It reports on the headline earnings per employee for banking activities only, a number that increased to R545 000 in 2018.  

Source: Standard Bank 2018 results booklet

The strategy to grow earnings while reducing headcount (actively or passively) is firmly embedded among most players in the local banking environment. The trend, based on the above table, is positive over the past year. Digging into specific units where splits are disclosed, such as Nedbank’s retail unit, will paint an even better picture.

On Thursday, Standard Bank said it would cut around 1 200 jobs and close 91 branches as “part of efforts to digitise its retail and business bank”. 

On Thursday, Standard Bank said it would cut around 1 200 jobs and close 91 branches as “part of efforts to digitise its retail and business bank”. Read more here

* Hilton Tarrant works at YFM. He can still be contacted at hilton@moneyweb.co.za

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

AUTHOR PROFILE

COMMENTS   11

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up for FREE

More job losses to make up for:
1. Higher cost of funding due to messed up country
2. Unsecured debt below R 50000 will be worthless-new debt intervention law
3. Lower investment and borrowings by stretched consumers and businesses
4. Bad debts coming-property worth a lot less than 3 years ago-change the cap rate a percent or two and cater for higher vacancies and higher expenses and as another commentator said you drop 30%

5. Years of elite and Corporates taking loads of cash offshore and not reinvesting/saving in the economy.

Capital goes where the return and/or confidence is, period.

Poor governance, poor populist policies, flip flop in policies, state capture, theft and corruption. These combined have made it incredibly difficult over the last 5 years to survive as medium and small business owner in SA. The mining industry…dying, industrial capacity….dead.
It had to feed into the banks eventually as their new and existing business dried up too, it was just delayed a bit.
Either government partners with private capital to create confidence and returns or the tax collections will continue to decline….the final day if they carry on like this will be when they expropriate factory shells and bankrupt banks and pretend they’ve won…check Zim.

My dear man, will you invest in any of the following:

1. Eskom
2. An Iqbal Surve’s pension jamboree
3. Any sector where the goalposts shift before you can count to five
4. Jacob Zuma’s personal piggy bank
5. A country with extraordinary levels of crime, where many criminals are exalted
6.
7. Des van Rooyen and his ilk

Will you sponsor Khulubuse Zuma’s participation in a marathon?

The good news is that you don’t have to. Your taxes are already funding this ruination.

While the problems in South Africa is not helping this is part of a global trend. If anything SA is behind the curve. Technology is making the lower middle class reduntant. Financial services have provided employment and supported upward mobility of people out of blue collar jobs into better paying clerical jobs. The trend is now firmly set to go the opposite way.

The disappearing middle class is part of the reason we are seeing the rise of populist politicians on the right and the left in the western world. Lumping this trend on top of SA’s self made and historical problems is very concerning.

I did not know they had staff, my last visit lasted all of 10 minutes, no one wanted to attend to me so walked out.

The banks plan ahead much better than most businesses. They clearly have no faith in the New Dawn.

With Davies and Patel each trying to out-regulate the other expect more job losses.

What is this “branch” you speak of?

I have not been inside a bank branch this decade. We have no chequebook, everything is either card or internet banking. Cards they deliver every few years. Interaction is all by phone and email. Quite happy with this.

It all changed late 90’s. Before, there was a manager that knew you personally and your issues. Then banks got clever and centralized the system of command and control.

The retail banks have been acting like arrogant over staffed govt institutions for years now. As a long-standing small business client, ABSA forces me to go into their branch to collect a new card – really ??? Staff mingling around aimlessly, jabbering away amongst themselves, totally oblivious of the clients who pay their salaries. They are in for a tough time ahead !

They are indeed, but surely you can see the broader societal problems with this trend. Technological interruption is also not only having an impact on branch based jobs (typically lower paid) but also on head office higher paid jobs.

What prospects does a 45 year old male that gets made reduntant have? In a middle management role he is probably earning around R1m pa. He probably has a a R3m bond where he is only starting to make a dent in the capital, vehicle finance, kids school fees, education etc etc

Does he “deserve” to be fired because he was maybe not the start worker at head office. Well in the strict Darwinian sense of capitalism yes. You seem to agree with that view. I dont. We need to way up the benefits of technology with the costs and consideration needs to be given to the devastation that technological “disruption” has caused to the lower middle class and will cause for teh upper middle class going forward.

The breakdown of families in the US mid west, with educated people having to work 2 or 3 menial service based jobs to get by (flipping burgers at McDonalds; driving Uber) is a direct consequence of this trend.

Be very careful that you are not the one “disrupted” – this is not going to hit “them” it will hit “us” as well

Load All 11 Comments
End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

NEWSLETTERS WEB APP SHOP PORTFOLIO TOOL TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company: