Jobs in the firing line as banks feel the pinch
July 8, 2008
By Ethel Hazelhurst
Johannesburg - After announcements from two major financial institutions that they are shedding staff, a third plans to follow suit.
The home loans division of First National Bank (FNB) was planning to "reduce the layers of current management" after a decision to embark on "a significant restructure" to "reduce the extent of the bank's home loans product representation in the current seven regional offices around the country", it said yesterday.
Xolisa Vapi, a spokesperson for FNB, said: "The restructure is still in proposal stage and we cannot discuss the number of staff impacted."
The announcement follows news last week that insurance group Mutual & Federal (M&F) and bank Absa are retrenching.
Asked whether it might make a similar move, Standard Bank was not prepared to give a direct response.
The bank announced a job freeze about six weeks ago.
Nedbank human resources director Shirley Zinn said the banking group was not considering job cuts at this stage.
"We are carefully managing our head count growth," said Zinn. "But it's not a job freeze, because we still have to fill critical posts."
The banking sector has been among the hardest hit by the 5 percentage point increase in interest rates in the past two years, which has pushed benchmark prime and mortgage rates to 15.5 percent.
Many consumers are not in a position to incur further debt, so credit volumes are falling.
Henry Shaw, a banking consultant, said the banks tried to avoid retrenchments, but when business volumes fell "there is generally a review of who is doing what". In the case of Absa, he said: "There must be significant pressure from Barclays for it to perform."
Absa parent Barclays has announced write-downs worth £1.64 billion (about R25 billion) related to the global credit crunch, according to UK press.
Chris Steward, a portfolio manager at Investec Asset Management, said that as a rule of thumb, staff costs made up about 50 percent of financial institutions' overall costs.
He said margins were being squeezed as volumes slowed and credit quality deteriorated.
He added that the extent of the damage would not be known until next month and September, when local banks released their figures on non-performing loans and bad debts, and provide information on how cost structures were rising relative to revenues.
But, according to Steward, an indication of investor perceptions was that the bank index had underperformed the market in the year to date by about 25 percent.
Keith Kennedy, the chief executive of M&F, said yesterday that the company had a new business model that needed 600 fewer employees. The company, which has 50 branches countrywide, currently employs about 3 000 people.
Mike Schussler, an economist at T-Sec, said: "We will have to lower our expectations of job growth in the economy.
"The [country's] formal sector created only 8 000 jobs in the first quarter of this year, from an average of 30 000 a month in 2005 and 2006."
He said the country was looking at more retrenchments - despite the skills shortage.
|
|
