Markets & Finance

Banking sector braces for more job cuts as profit margins shrink

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Kenyan banks are adopting technology to cut costs, resulting in job losses. PHOTO | AFP

The Kenyan banking sector is expected to continue shedding jobs for the third year in a row, with 2017 likely to see the worst bloodbath since the late 1990s when the sector was in industrial ferment.

Job cuts are expected as lenders seek to protect margins under the new law capping interest rates and a harsh economic environment.

“The only way for the industry to deal with the challenges facing them is cost management. The other alternatives are long term strategies such as how to better manage liquidity,” said head of research at Standard Investment Bank Francis Mwangi.

Some of the lenders that have given indications of pending job losses include Consolidated Bank, Standard Chartered, Ecobank and National Bank, which has reopened its early voluntary programme.

READ: NBK opens door for more early staff exits to protect its margins

Banks that reduced their staff numbers during the year include Equity, Co-op, NIC, sharia-compliant First Community, Family and Sidian Bank.

“There will be continuation of the reorganisation of banks where institutions will be looking at their business models to ensure they are operating sustainably in the new environment,” said Kenya Bankers Association chief executive Habil Olaka.

READ: Sharia bank First Community lays off third of its employees

ALSO READ: NIC Bank set to retrench 32 senior-level employees

Sidian Bank staff layoffs pointer to looming turmoil

National Bank, which two years ago released 220 employees in a voluntary early retirement programme costing it Sh1.1 billion, has opened a second window for exits beginning January. The programme is open to all staff who have worked with the bank for more than a year.

Standard Chartered has disclosed that 300 staff would be rendered redundant with the closing down of its Nairobi shared services centre, whose functions would be migrated to Chennai, India.

READ: StanChart deal with Indian firm puts 300 jobs at risk

Consolidated Bank’s top management told the Business Daily in a previous interview that it would cut jobs in the first quarter of 2017.

Increased uptake of mobile banking and automation has been a key contributor to the job cuts with more lenders expected to embrace technology solutions more to protect their revenue margins. The banking industry has been a key job creator since 2002 until this year when it recorded a decline of 711 positions to 36,212 employees.

The decline was attributed to reduction of clerical and secretarial jobs, which shrunk by 2,036, even as the number of managerial, supervisory and support staff increased.

Work done by clerical and secretarial staff has been taken up by technology and contracted agents under the agency banking model introduced in 2013, resulting to the cuts. Management and supervision staff, who are well remunerated, have been the most affected in this year’s job cuts as banks pushed for reduced payrolls.

Job cuts in the banking industry were last witnessed in the five-year period to 2002 when jobs declined to 10,884 from 14,177 in 1998 that included 800 sackings following the last national banking strike.

The period was characterised by liquidity crisis, as is the case currently, which saw several lenders fold operations.

Some of the lenders that have shed jobs owing to technological solutions include Equity Bank that reduced its staff numbers by 400 this year adding to 660 positions lost last year.

Co-operative Bank also reported a shrinking headcount for the nine months to September.

The two lenders that have been among the fastest expanding in the last decade have attributed the drop to natural attrition following recruitment freezes announced three years ago.