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BFCSA: CBA boss under pressure to reveal extent of job cuts. The Bank with No Morals

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CBA boss under pressure to reveal extent of job cuts

Australian Financial Review Apr 12, 2019 1.47pm

James Eyers

 

Commonwealth Bank has told the Finance Sector Union that newspaper reports of mass redundancies and branch axings are "misleading and unnecessarily alarming", as banks are being wedged between analyst demands for cost reduction as credit growth softens, and unions and politicians who want to see them continue to be big employers.

Earlier on Friday, FSU national secretary Julia Angrisano wrote to CBA chief executive Matt Comyn asking him to explain reports the bank planned to chop its workforce by 20 per cent, or 10,000 people, and close 300 branches. The union described the numbers as “outrageous acts”, although analysts say the widespread adoption of digital banking means banks will continue to cut operating costs to maintain profits in coming years.

As CBA goes more digital – driven by more customers banking via their mobile phones and fewer visiting branches – it is possible job losses of the magnitude reported could happen in the next three to five years.

The bank told the union it remained committed to its people, and was "disappointed that speculation may be repeated as fact". Digital banking and automation means less documentation needs to be processed by bank staff in branches or support centres.

As it cuts headcount, CBA may not announce a major redundancy plan – like National Australia Bank did in 2017 when it announced 6000 jobs would go. Given political pressure on the banks, it may prefer to not replace staff that leave the bank, and could consider outsourcing more work.

In response to a question from Ms Angrisano to confirm the numbers of branches to be closed, Mr Comyn said 300 "is incorrect and misleading".

It is understood CBA is focusing on closing branches in metropolitan areas, where rent and wages are higher, rather than rural areas, a move that also reflects the political sensitivity of closing branches in the bush. The bank told the union it remains committed to "limit our review of branches in regional and rural towns during this financial year, given the conditions currently experienced by rural NSW and Queensland".

Separate to the decision on branches, CBA could consider reducing its fleet of ATMs, which have become more expensive to service as cash usage reduces in favour of tap-and-go payments. Although for the same political reasons, any cuts may also be mostly limited to metropolitan areas, where other banks' ATMs can be found nearby.

Ms Angrisano said it would be an “outrageous act” to put thousands of staff “onto the unemployment queue” as the bank was trying to restore its reputation with the community following the Hayne royal commission. The issue of banking job losses could feature in the federal election campaign.

“Matt Comyn is on the wrong track if he thinks shutting down branches and sacking staff will enhance the bank’s reputation in the community and increase profits,” Ms Angrisano said.

She said the newspaper reports would “lead to uncertainty and have far reaching negative impact on employees”. CBA said it would continue to consult "regarding changes that have implications for our employees and will be open and transparent as soon as any decisions have been made."

Cost-cutting moves

In contrast, the market is pushing CBA to slice costs to allow it to maintain the fully franked dividends paid to millions of shareholders. CBA has previously announced a big cost-cutting program in response to a more challenging outlook, with banks facing sluggish credit growth, especially for housing.

CLSA analyst Brian Johnson said CBA also has the potential to send offshore back-office loan processing functions. “CBA’s cost-reduction program targets lower absolute dollar costs,” he said.

“CBA’s strategy is to simplify the business to focus on retail and commercial banking where the ROEs are highest, reduce costs and lead in digital."

CBA shares closed up almost 2 per cent higher at $71.63 on Friday, stronger than the gains at rival Westpac.

Over the last half year, CBA reduced costs by 3.3 per cent, to $9.9 billion. At the half-yearly results in February, Mr Comyn spoke about the need for CBA to make changes to remain competitive.

CBA remains under pressure to find cost savings in other areas, given remediation costs relating to the royal commission continue to mount; for example, ASIC has said it expects CBA to repay customers who were charged fees without receiving services $143 million. CBA said in February its risk and compliance-related investment rose 78 per cent to $432 million.

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