Morgan Stanley's Job Outlook for 35 European Banks
"10% Workforce Reduction Over 5 Years Due to AI and Digitalization"
"Branch Closures and Voluntary Retirement Have Reached Limits... AI Adoption Underway"
It is projected that around 200,000 banking jobs in Europe could disappear over the next five years. This is due to the adoption of artificial intelligence (AI) and the ongoing trend of branch closures. According to Yonhap News, citing the UK daily Financial Times (FT) on December 31 (local time), "Morgan Stanley analyzed 35 European banks and estimated that by 2030, workforce reductions of up to 10% could occur due to cost savings from AI utilization and the shift of work to online platforms."
Dutch bank ABN AMRO has announced plans to reduce its full-time staff by about 20% by 2028. Photo by Reuters Yonhap News
Given that the total number of employees at these 35 banks is about 2.12 million, this means approximately 212,000 jobs could be lost. The workforce reductions are expected to be concentrated in central service divisions, including risk management, regulatory compliance, and operational support roles. Morgan Stanley noted, "Many banks have cited potential efficiency gains of up to 30% as a result of AI and further digitalization."
According to Yonhap News, European banks are under pressure to improve return on equity (ROE) and cut costs, lagging behind the United States, and AI is being discussed as a catalyst to facilitate restructuring. In November last year, Dutch bank ABN AMRO announced plans to reduce its permanent staff by about 20% by 2028, and in March last year, France's Societe Generale stated, "There are no sacred cows when it comes to cost reduction."
Swiss bank UBS, in the first half of last year, sent clients videos of analysts represented as avatars using AI, and over the past few months, 250 senior executives reportedly participated in an AI leadership event at Oxford University.
Morgan Stanley pointed out, "Until now, banks have tried to lower their cost-to-income ratio (CIR) by closing branches and offering voluntary retirement, but these efforts have now reached their limits." The firm added, "Banks now see no option but to lower the CIR by automating head office work through AI adoption." CIR is an indicator showing how much a bank spends on selling, general, and administrative expenses such as labor costs, rent, and IT expenses to generate revenue. The lower the CIR, the higher the management efficiency and productivity, as it means more profit is generated with less cost.
The cost-to-income ratio (CIR) of major investment banks (IB) on Wall Street in the United States is in the low 50% range, while that of major European banks reaches 70%. Reuters Yonhap News
In reality, the CIR of major investment banks (IB) on Wall Street in the United States is in the low 50% range, while that of major European banks reaches 70%. Strong labor laws, bureaucracy, and outdated IT systems have been identified as factors pushing up the CIR. In South Korea, the CIR of major commercial banks is in the 40% range, lower than even the United States, which is attributed to voluntary retirements and branch closures.
Some voices are cautioning against the hasty adoption of AI in banking. Conor Hillery, Co-CEO for Europe, Middle East, and Africa at JPMorgan Chase, warned, "We must be careful not to lose sight of the basics by becoming overly excited about AI," and added, "If the industry fails to strike a balance between AI utilization in core work and training new employees, it could face significant problems."
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