Hit With Massive Layoffs, Australian Banks Shift Focus
New technology, foreign competition, and revenue pressures cause major cutbacks
SEVERAL Australian banks are undergoing a major shake-up.
Commonwealth Bank of Australia recently announced it would lay off 8,000 workers over the next two years. Westpac Bank will trim 8,000 over the same period. And ANZ Bank expects to let go 2,000 this year, with an equal number of job losses over the next few years.
So far, about 20 percent of banking industry employees have lost their jobs in the last three years. "The layoffs are so substantial because there's great pressure to generate revenue," says Craig Drummond, a banking analyst with J. B. Were, an investment banking firm. "There's no asset growth and a lot of company pressure building on interest margins."
Competition and new technologies also are having an impact on layoffs. In 1985, Australia began to open its doors to foreign banks. Now, banks from countries as diverse as Korea and Greece compete for niche markets alongside Australia's own banks.
The recession has hit Australia hard and banks are reflecting a larger trend to cut costs and deal with competition by getting back to basics; some, like Westpac, are closing off-shore operations and concentrating on better serving Australian customers at home.
Westpac, after several years of turbulence and many changes of its chief executive officer, seems to have buckled down with American Robert Joss, formerly of Wells Fargo Bank. "The bank's target by 1995 is to reduce expense-to-income ratio to 58 percent. And we're well on target," says Rod Metcalfe, a Westpac spokesman.
Technological changes are playing a key role in the massive shedding. Bank personnel is becoming redundant because of the rise of EFTPOS (electronic funds transfer at point of sales), where people pay for purchases in markets and gas stations, and because of telephone banking and the explosion of automatic teller machines (ATMs).
Australians are big users of ATMs: 3,500 people for every ATM. In the United States, it is 2,700 per ATM, according to the Australian Bankers Association.
Australia has more branches per capita than many countries. With 7,500 bank and building society branches, there is about one for every 2,300 people, versus one for every 3,000 in Britain.
Major banks say they would like to get rid of excess branches, but with property prices down, instead they are working on giving branches a new focus. Westpac's Mr. Joss says he wants to see greater emphasis on sales and service.
All the banks are moving much of the processing work that used to be done in branches to central facilities. "So staff only has to deal with customers and their needs," says Lyndell Deves, chief manager of group communications for Commonwealth Bank. "That's the real reason why staff numbers will reduce over the next two years."
This centralizing process has been happening overseas, but Australia is only now catching up.
"Most of the changes are structural industry changes that really should have happened three or four years ago but didn't because banking conditions were buoyant at the time," Mr. Drummond says. "Banks didn't reduce staff levels as they should have, [and] now that there's a lot of pressure on revenue, it's a good excuse for paring back."