The big job cuts announced by ANZ Banking Group are a reflection of heightened wholesale funding costs, muted demand among small business borrowers, and the global financial crisis finally hitting Australia's banks, an expert says.
Andrew Inwood, founder and principal of financial services research company CoreData, says ANZ's announcement it would sack 1,000 people throughout the year comes as banks seek to tidy up underperforming or unnecessary operations before their next round of profit announcements.
Inwood says the banks only in the past six months or so have started feeling the effect of the GFC, and are now trimming employee numbers after undertaking other cost-cutting measures.
The 492 ANZ staff to receive the bad news yesterday mostly worked in middle management, back office and support. ANZ's Australian chief executive Phil Chronican said yesterday that "we are not likely to see the rates of growth we saw in the past and we do not see financial services having the stellar growth path it used to have".
Inwood says that the banks' higher funding costs have been exacerbated by years of weakness in SME lending, traditionally a "profit engine" for them.
"The SME business, which used to be the holy grail of business lending, is not as attractive as it used to," Inwood says.
"SMEs don't have that much debt anymore; they're paying down debt ferociously."
"And raising money from international markets has become so expensive, even in Australia, that to make money is really hard now."
This sentiment was backed by the Reserve Bank this morning, with assistant governor (financial markets) Guy Debelle saying that the global repricing of bank debt had "clearly affected the Australian banks' wholesale funding costs".
"I think the only thing which is certain is that uncertainty is likely to persist for some time to come," Debelle said.
The good news for SMEs is that they have derisked to the extent that Inwood doesn't expect the banks to take an aggressive line with them in the near future, even as forward-looking indicators suggest that businesses and consumers are feeling GFC-levels of anxiety about their outlook.
A recent report by financial research firm East & Partners found that demand among micro, SME and mid-corporate businesses had fallen by 3.5% in the two months since November 2011. Its head of client services Amy Nixon said the 2012 credit environment had the "potential to be challenging".
The announcement follows recent job cuts announcements from Westpac and Macquarie. The amount of jobs forecast to be cut from the big four banks over the coming year varies from 7,000 from investment UBS, to about 10,000 from the Finance Sector Union, to 14,000 from East & Partners.
Drawing attention to the big four's combined record annual profits of $24 billion, the FSU's Leon Carter has called for "more action from the federal and state governments to get involved in the industry".
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