China’s largest state-owned banks cut thousands of jobs


China’s largest state-owned banks to lay off thousands of staff members in the country’s banking industry as the world’s second-largest economy among its most challenging year faced.

The top four national banks, which reported negative to flat net profit growth for the first half of this year, reported a combined total of 22,260 jobs that have been eliminated.

Bank profits were essentially flat in the first half of the year as lenders struggled with shrinking net interest margins and rising bad loans. With top-line growth sluggish, lenders have turned to cost-cutting.

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Of China’s 19 listed banks, seven reported declines in total employment at the end of June, compared to six months earlier. The group which includes five of the six largest banks by assets cut a total of 34,691 jobs in the period, according to Wind Information, which compiles data from the banks’ quarterly financial statements. For the full group of listed banks, employment fell by a net 20,791 workers.

Employment at China’s big banks has expanded virtually uninterrupted for the past decade, so the cuts could signal a turning point. Bankers say some colleagues have left voluntarily in recent years to join financial institutions such as securities companies and peer-to-peer lenders that are seen to be on the rise.

The cuts come as western peers scale back more dramatically. Eleven of the biggest European and US banks cut almost 100,000 jobs in 2015, according to a Financial Times analysis.

“Banks are generally seeing more net interest margin and credit-cost pressure, so they need to control operating costs more tightly if they want to scrape out flat or marginally positive earnings growth,” said Hou Wei, Asia banks analyst at Sanford C. Bernstein in Hong Kong.

“In the short term, they’re using operating costs as a lever to smooth earnings growth a bit. But in the long term, this is a more structural trend. Banks are investing quite heavily in e-banking service.”

Besides a reduced number of workers, the first-half data also pointed to pressure on pay. The big four banks’ combined staff compensation costs  including salaries, bonuses, allowances and post-employment benefits  fell 2.6 percent from a year earlier. At the mid-sized China Minsheng Banking Corp., the decline was 22 percent.

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