More bank job cuts to follow Scotiabank, TD: analyst

Scotiabank office support workers are the latest casualties in a round of industry-wide job cuts as banks seek to boost profit amid threats from new players and economic stagnation.

The bank said Friday that over the next two years it will cut jobs and consolidate regional centres into two technology hubs in Toronto. The bank did not say how many employees would lose their jobs.

Canada’s Big Six banks are aggressively trimming expenses to offset slow revenue growth in their core businesses to deliver profit growth to shareholders.

Banks have long cut their workforces – their biggest expense – during periods of economic instability. But this downturn also coincides with a new challenge: a wave of technological transformation.

The affected Scotiabank employees were largely doing paper-based processing, now completed directly by customers online or by automated systems.

“These operations were initially built to serve the branch network when much of the work was done on paper and where the majority of customer banking took place,” said Scotia spokeswoman Sheena Findlay.

“Since then, customers and the bank have both moved increasingly to digital banking and digital operations.”

All of the big banks are taking similar cost-cutting measures, said John Aiken, a banking analyst at Barclays Capital.

A report from Reuters Monday said TD Bank is cutting several hundred jobs as part of an organizational review. National Bank announced earlier this month that it is cutting hundreds of jobs.

Aiken expects other banks will follow suit.

CIBC and BMO have also announced restructuring charges, he said, an indicator that job cuts are coming.

As new technology makes banking operations more efficient, jobs involving paperwork are the first to go, Aiken said.

Rapidly evolving financial technology is a double-edged sword for banks.

It is streamlining bank operations, but tech companies - from giants such as Google and Apple to start-up mobile account and loan companies - are threatening their traditional sources of profit.

Many banks are investing heavily in financial technology to compete against emerging fintech players even as they reduce spending in other areas.

The imperative has overwhelmed the immediate benefits that cost-cutting would otherwise have on banks’ bottom lines, a National Bank analyst report concluded earlier this week.

Both Big Six banks that acknowledged job cuts this week have recently announced the opening of new high-tech incubators that will create hundreds of jobs.

“There’s going to be ongoing investment in technology,” Aiken said.

“That is where the threat of disruption is coming from and the banks need to try to stay ahead of that.”