Australian banks are firing, but some are still some hiring

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Australia's major banks may still be among the most profitable in the world, but the employment outlook still relatively mixed amid suggestions that the weaker economy will result in more jobs being cut at the big players, while the smaller independent banks will be forced to tackled headcount to remain competitive.

PricewaterhouseCoopers said its recent banking review, Making More of Less, that despite the solid performances of the Big Four Australian banks, the outlook for the sector remained challenging. “The key is likely to be around growing non-interest income and effectively managing costs in a tough environment.” This could be achieved, says Nomura analyst Victor German, by reducing staff overheads. German said in a note published earlier this month that considering staff costs were 52-56% of the major banks’ expenses, these could be targeted in cost cuts.

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The banking industry has already started reining in employment – some 4,600 jobs have been cut in the past 18 months, and another 600 may soon be added to that tally if ANZ offshores its Melbourne call centre.

Political uncertainty

Among companies that aren’t actively laying off staff, most are keeping headcount neutral. Peter Acheson, CEO of recruiters Peoplebank, says bank hiring this year has been broadly flat. Any new jobs added had been driven primarily by domestic and global changes in regulation, and the growth in the superannuation industry in Australia, which has helped offset a pedestrian performance in credit, where banks traditionally earn fees.

And, Acheson believes, the current lacklustre hiring – and not only in the bank industry – has not been helped by the Prime Minister, Julia Gillard, announcing the September elections in February. He says the political uncertainty – Gillard’s Labour party is facing defeat in the polls – has put every major corporate off hiring until after the elections. It is looking increasingly likely that a new Liberal party-led government will come into power, and repeal the unpopular tax and industrial relations legislation that has been blamed for dampening jobs growth.

“The Liberal Party will probably repeal the carbon tax and the mining and resources rents tax, and this will probably have a pro-employment effect. Confidence will be restored in the domestic economy, and employment should rise.

“I think there will be a spike post election, but this is not likely to be sustained more than three or four months, after which hiring will return to more normal economic levels,” Acheson says.

Mark Steyn, CEO of recruiters Hudson Asia-Pacific, says the main focus right now is holding headcount firm in the run-up to the elections, but he maintains at least a quarter of companies are hiring. It does regular surveys of the banking job market in Australia, and recent results showed that 25% of financial institutions were planning to hire in the next few months. About 70% of companies said they were not planning any changes to staff numbers before September. And only 5% of companies said they were looking to cut jobs, down from 10% in the previous quarter.”

Jane McNeill, director of Hays Banking, says employers are having a more optimistic outlook about business conditions and hiring activity."Permanent hiring started fairly strongly in the first half of 2012 and continued until the end of the year when it slowed dramatically. Many organisations started 2013 with a hiring freeze but by the end of the first quarter we saw a move back into the positive with permanent candidates in demand."

Expertise to fuel change

Steyn says that while many of the banks are still looking for efficiency gains, with greater investment going into automated and online banking processes, “we are seeing areas of growth, such as in private and business banking. And there is still demand for people with skills such as quantitative analysis.” 

Hays said that bank are advertising short and long term jobs for business analysts, project managers, regulatory and operational risk experts, and credit risk analysts and managers. McNeill says there is also a need for wealth management and financial planning professionals, especially those with Asian language skills.

The losers in the current economic cycle, however, are the small banks, which have been hit by stiffer capital adequacy requirements and the aggressive pursuit of market share by the Big Four. One recruiter says the small and regional banks have been forced into a corner, slashing costs to remain competitive with what is increasingly being called a banking oligopoly. In April, mortgage broker AFG said that the Big Four owned 79.4% of loans, increasing their market share from 75.7% in September last year by outpricing smaller lenders.

The pressure on market share, the recruiter says, was forcing the smaller banks to reduce or suspend hiring in order to cut costs as they struggle to survive.

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