Canadian banks cut workforces just like last year. Trying to function in lessen workforce to satisfy investors demanding returns on tens of billions of dollars. To make a return for lenders that have poured into new technologies.
Canadian banks cut workforces 4.4% from a year earlier to a combined total of 291,409 full-time equivalent employees as of Jan. 31. That is down 5.2% from the highest in the third quarter of 2019.
However, after many attempts to prove it as a developing economy, loan growth outside of mortgages has been stagnant. The reason is the relatively slow pace of COVID-19 vaccinations in Canada.
“It’s very difficult to grow” revenues, said Todd Johnson, chief investment officer at BCV Asset Management. He also owns shares of some of the biggest banks in the country.
Banks are likely to continue investing in technology at similar levels as the past few years. This will be “welcomed by investors as long as earnings and dividends continue to grow”. Moreover, if the “tech investment displaces some labor costs,” said Todd.
Canadian banks cut workflows follows combined quarterly year-on-year growth of 4% to 5% in 2018 and 2019 across the six big banks. The cuts have affected efficiency ratios, or non-interest expenses as a proportion of revenues, by about 2 percentage points from a year ago at most banks, disclosures show.
The phenomenon isn’t unique to Canada. U.S. and European banks last year joined the Bank of Montreal and Canadian Imperial Bank of Commerce in announcing or resuming layoffs, with the former expected to shrink headcounts by an average of 5-10%.
While Canadian banks cut workforces, lenders are still growing in this area because their digital shift has lagged.
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