Banks Planning Massive Job Cuts – Old Business Models No Longer Work

Although top management at the big banks is doing just fine, things are going to get a lot tougher for the average bank employee.  In an interview with Bloomberg TV, Meredith Whitney says the banking industry will slash 50,000 employees from the payrolls due to declining margins and increased regulations.

“I think the industry goes for another 50,000…Everything goes in extremes and particularly in financial services. I hope I am around when the over hiring phase comes back to this market. But I would argue the banks have not over fired and are really middle of the way through firing. As I said, shareholders are demanding increased profitability. These banks are not earning their cost of capital and it’s being reflected in their stock prices.”

Ms. Whitney notes that banks are in trouble due to deleveraging and need to downsize dramatically.  The old business models in banking no longer apply, “big banks are on their backs”, and struggling with profitability and a lack of growth.

“the old way of making money for Wall Street for so many of the banks that became real Wall Street driven revenue machines is gone. That was driven by the unsexy world of housing and leverage. The world as deleveraging—at least the post-modern world is deleveraging. It puts real sustained pressure on revenues and the business models just have to shrink.”

In a somber note for those unfortunate enough to lose their jobs, Ms. Whitney forecasts a very bleak future for laid off bank employees since their job skills are “not easily transferable” to other industries.  See the full interview below.

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