As banks keep cutting costs, less fancy staff are being squeezed the hardest
Investment banking revenues may be recovering, but banks' cost-cutting days are never done. And as banks cast about for costs to remove in a world where deals are recovering, guess who's in the firing line? Not people in the front office.
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Barclays is cutting £2bn from its costs between now and 2026, of which £188m is supposed to be coming from cuts to the headcount in its investment bank. In yesterday's second quarter results, Barclays revealed that it's only cut $400m of the $2bn so far and that it plans to cut another $600m this year. If similar progress has been made in terms of headcount cost savings, £150m of savings are still to come.
Barclays did cut some bankers in May. "A few hundred" roles were eliminated in what CFO Anna Cross yesterday described as "structural cost actions" that were "not really that significant." As Barclays looks for ways to remove additional costs, there are complaints that control and operations functions are bearing the brunt of the squeeze as jobs are moved to low-cost locations, with senior people being cut.
Barclays isn't alone in following this tactic. Bank of America is thought to have cut headcount and moved technology jobs to India this week. Deutsche Bank is coming after its "non-client facing areas" as it squeezes operating costs down to €20 billion by 2025 (they were €12bn in the first half). Having finished stripping out management layers, Citi is now cutting another 15,000 jobs of which 10,000 will come from areas like technology and operations.
The squeeze is already prompting complaints. While Deutsche Bank, for example, continues to stock-up on front office bankers and traders to drive revenue growth, infrastructure professionals say their teams are shrinking.
"In infrastructure, the group COO is quietly firing a lot of high performing people," says one Deutsche Bank insider. "They say it's due to "affordability" issues (to achieve balance scorecards and cost-to-income-scorecards) but they've wasted millions on failed programs over the years and a lot of good people are being let go."
Deutsche Bank didn't comment on its infrastructure cuts. If it's trying to reduce its absolute headcount number it's not doing very well though: infrastructure employees aligned to the investment bank went from 11,342 in the second quarter of last year to 12,191 at the end of Q2 2024.
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