In order to improve profitability amid revenue headwinds due to a weak economy and stricter capital requirements by regulators, Bank of New York Mellon Corp (NYSE: BK - News) announced a job cut plan on Wednesday. BNY Mellon is not the first to announce this measure; it has followed in the footsteps of many other large global banks.
BNY Mellon said that it will cut about 1,500 jobs, which represents about 3% of its total workforce. The primary intention is to reduce expenses, which have been growing significantly. Though the company is also experiencing revenue growth, the rate of expense growth is higher.
The bank has not yet finalized the categories of employees to be retrenched or the areas, but said that it would try to freeze hiring first to minimize job cuts. Moreover, it will try to retrench temporary workers, consultants and contractors.
According to the data compiled by Bloomberg Industries and company statements, 50 big global banks, including Bank of America Corp. (NYSE: BAC - News), HSBC Holdings Plc (NYSE: HBC - News), Credit Suisse Group AG (NYSE: CS - News), have already announced 60,000 job cuts since January.
If the pace remains stable, there will be more than 101,000 jobs cuts by this year end. In 2008, the banks planned to cut 192,000 positions due to the then loan losses and turmoil in the credit market.
Earlier this month, Britain's HSBC announced plan to cut 30,000 jobs in the next two years with the intension to reduce costs.
The restructuring measures had commenced early this year in Latin America, the U.S., UK, France and the Middle East. These will result in a headcount reduction of 5,000. Now, the company is aiming for 25,000 more job cuts by 2013.
Overall, until revenue generation revives, a hideous cost-to-income ratio will continue to force many more banks to reduce costs through job cuts as they need to maximize profits in order to boost capital ratios. Of course, everyone will now keep their eyes on the weak performing firms that have not yet announced job cuts. We expect job cut announcements from many other banks including Morgan Stanley (NYSE: MS - News) and Deutsche Bank (NYSE: DB - News) in the near term.
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