Deutsche Bank Chief Executive Officer Christian Sewing notified his staff on Thursday, saying he was going to reduce the number of employees, including managers. HSBC Holdings CEO Georges Elhedery said earlier this week that he was closing large parts of his investment bank in Europe and the United States, according to Luxembourg Times.
Even Swiss private banks have not escaped the turmoil, with UBS Group cutting hundreds of jobs in its home market and Julius Baer Group set to announce a wave of layoffs over the next two years.
Sewing told reporters that 2025 will be a “year of reckoning,” adding that “nothing is off limits.”
Behind all these disparate moves is a drive to boost lagging profits, a problem that could become more acute as the new Trump administration’s approach to business deregulation in the US puts European lenders at a disadvantage to their Wall Street rivals. In addition, stagnant growth in the European Union is further dampening the outlook for lending organisations in the region.
The contrast between banks in Europe and the US is already stark. Jeremy Barnum, Chief Financial Officer of JPMorgan Chase, which this month announced the biggest profit in its history, said one of the biggest challenges he faced was the “high-stakes” dilemma of what to do with all the excess capital the bank generates. Goldman Sachs Group CEO David Solomon’s message sounded confident as he spoke of the company preparing for a revival of deals.
“It’s a reflection of how European banks have struggled to compete with their US peers” since the global financial crisis, said John Cronin, a Dublin-based financial industry analyst and founder of SeaPoint Insights. “If anything, given the new pro-growth Trump administration, the top five US banks will become relatively stronger over the coming years.”
On Thursday, Deutsche Bank’s Sewing pointed to the possibility of management ranks and even entire business lines shrinking in the coming years. That came after a 14 per cent rise in fourth-quarter costs from a year earlier overshadowed better-than-expected performance at the investment bank, where fixed-income traders posted their best fourth quarter ever.
Earlier this week, Bloomberg News reported that UBS had begun a wave of job cuts in Switzerland, with hundreds of employees receiving notices in recent weeks. The measure is part of an ongoing integration with Credit Suisse, a former rival that the company bought as part of an emergency rescue two years ago.
UBS CEO Sergio Ermotti told Bloomberg this month that it would continue to reduce headcount after the historic acquisition. The Swiss lender is seeking to cut another $5.5bn (5.3bn euros) on top of the $7.5bn already achieved after the deal.
The cuts at Julius Baer will be across all divisions and the bank’s 15-member executive board will also be significantly reduced, Bloomberg News reported this week. Under the leadership of CEO Stefan Bollinger, the Zurich-based asset management firm is looking to complete a turnaround that began after losses at defunct real estate empire Signa. The bank employed about 7,400 people at the end of 2023.
Julius Baer is due to report fourth-quarter results on February 3 and UBS the following day.
Of course, not all is gloomy for European lenders. Some of them are planning to raise their payouts this year. According to Bloomberg News, Deutsche Bank plans to increase bonuses to its investment bankers by 10 per cent this month, while BNP Paribas plans to increase bonuses to its investment bankers by 5 per cent. Barclays is set to increase payouts by 20% after what has been a better year for traders and advisers.
But the biggest changes at HSBC are likely to come in June. Since taking over five months ago, CEO Elderi has become the man aiming to completely transform the UK lender.
“Going forward we will focus on areas where we can best serve our corporate and institutional clients,” said Elhedery’s lieutenant Michael Roberts, who heads the corporate and institutional banking division.
Still, the bank will have a strong presence in Asia, especially China and Hong Kong, and the Middle East.
“I don’t think this is about having to make a difficult choice between serving China versus serving the West – it’s about cold hard commercial facts,” said Alex Marshall, managing partner at CIL, a consultancy firm. It is “a realistic and pragmatic doubling-down of their bet on Asia and MENA capital flows” and it’s not that they are really abandoning a position of great strength in Europe and the US, he said.
