Profits soar but jobs lost at big four

The banks have been focused on cutting costs in order to bolster earnings.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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 Many of the jobs that have been lost have actually been replaced by overseas workers, who are often much cheaper to employ.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.

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

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »