Profits soar but jobs lost at big four

Although the big four banks may have achieved a record combined annual profit of $27.3 billion over the last year, the banks are cutting staff numbers in an effort to increase productivity and efficiency and reduce costs.

Between Westpac (ASX: WBC), NAB (ASX: NAB) and ANZ (ASX: ANZ), more than 1,900 full-time workers have lost their jobs over the last 12 months, with employee numbers spread across the banks falling to 170,200, according to figures from the banks’ results. Many of the jobs that have been lost have actually been replaced by overseas workers, who are often much cheaper to employ.

As highlighted by The Sydney Morning Herald, Commonwealth Bank (ASX: CBA) was Australia’s only major bank to expand its employee numbers in that time. The bank has refrained from offshoring employment, recognising the importance of culture and a feeling of security in the workplace, as well as the fact that customers usually prefer the service provided by onshore workers.

National Australia Bank was the biggest culprit for making cuts to its workforce. For the year to September, it cut 1172 positions, which included 504 in the second half. ANZ also cut 727 jobs whilst Westpac reduced its numbers by 78.

The banks’ costs were one of the main focal points for investors when the banks reported over the last fortnight. Credit growth has remained low despite record low interest rates, so the banks have been focused on cutting costs in order to bolster earnings.

According to UBS analyst Jon Mott, total costs for the banks were still higher than what most analysts had expected for the industry, which affected earnings per share by around 1.3%.

Foolish takeaway

Cost-cutting strategies, such as reducing staff numbers, greatly contributed towards the banks’ record annual profits over the last year, however, their profits will be very difficult to repeat in coming years as interest rates inevitably rise. As such, shares in the banks may not be the greatest option for investors with a long-term focus.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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