BNY Mellon Plans 3% Layoff - Analyst Blog
August 11 2011 - 1:11PM
Zacks
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 (BK) 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. (BAC), HSBC Holdings Plc
(HBC), Credit Suisse Group AG (CS), 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.
Among others, BNY Mellon's closest competitor, State
Street Corp. (STT) said on July 19, that it would reduce
850 technology jobs through layoffs and outsourcing.
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 (MS) and Deutsche
Bank (DB) in the near term.
BANK OF AMER CP (BAC): Free Stock Analysis Report
BANK OF NY MELL (BK): Free Stock Analysis Report
CREDIT SUISSE (CS): Free Stock Analysis Report
DEUTSCHE BK AG (DB): Free Stock Analysis Report
HSBC HOLDINGS (HBC): Free Stock Analysis Report
MORGAN STANLEY (MS): Free Stock Analysis Report
STATE ST CORP (STT): Free Stock Analysis Report
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