US sub-prime crisis to claim 200,000 bank jobs

Commercial banks will cut a record 200,000 US jobs in the next 12 to 18 months to reduce costs as the credit crunch continues to wreak havoc on the bottom lines of some of the world’s most prestigious financial institutions.

Celent, the financial research firm, said that one in 10 jobs in the US commercial banking industry will be lost as the write-downs from sub-prime investments pollute the entire banking system.

Octavio Marenzi, head of Celent’s financial consultancy unit, said: "The banking industry over the past 40 years has never seen a downturn in its revenue growth. In 2008, it looks like it will decrease for the first time in living memory. They’re going to have to respond with severe cost cutting. It’s not an environment they’re entirely used to."

The expected future job cuts compare to the record 153,000 redundancies implemented across the US financial services industry in 2007, more than half of them relating to mortgages.

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Background

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• Financial workers braced for redundancies

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However, the 2007 figure includes securities firms, which employ about 800,000 people in the US and have taken the biggest hits from the sub-prime crisis, whereas Celent’s latest estimate does not, Mr Marenzi said.

Most American banks have already cut hundreds, if not thousands, of jobs since the credit crunch took hold last summer, with Citigroup staff among the biggest casualties.

In the past year, Citigroup has announced over 20,000 job cuts and there is understood to be at least 2,000 more to come.

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