More redundancies and higher charges over the horizon

IT would not have come as a surprise to Halifax staff that the bank was shutting its operations here.

Rumours had been circulating since the summer that this was planned. On top of this, they, along with construction workers, are working in two of the country’s most uncertain sectors.

Whatever uncertainty exists elsewhere, there’s no doubt that there are many more job losses to come in banking and construction, which are both battling through an unprecedented period of upheaval.

There was a time when bankers were the envy of hard grafting private sector workers. They enjoyed big bonuses, substantial pay packets and their choice of jobs.

However, the decision by Bank of Scotland (Ireland) to close its 44 Halifax branches, resulting in 760 job losses, has again focussed attention on the sector.

Halifax is not the first bank to cut jobs. Bank of Ireland and AIB have yet to announce any major job cuts but it is believed between them they have let more than 3,000 staff go through natural wastage.

Ulster Bank is believed to have shed 1,000 jobs while National Irish Bank has cut 150. Added to the Halifax cuts and that’s almost 5,000 job losses between five banks.

No doubt there has been many others and even more to come. A merger of EBS, Irish Nationwide and Permanent TSB, billed as the third force in Irish banking, could result in a further 1,000 job losses.

AIB’s managing director Colm Doherty recently said “tough decisions” were on the way. If Bank of Ireland and AIB, who between them employ 25,000 people, were to take the same approach as Ulster Bank and shed about 11% of their workforce as soon as NAMA is established, then that would mean up to 3,000 more job cuts pushing the combined losses close to 10,000.

It’s not just the main financial institutions that are cutting staff. In the middle of 2008, job numbers at the IFSC stood at 25,000. However, this figure is understood to be down about 5,000 today.

The Irish Bank Officials’ Association estimates 5,000 more jobs could be lost at financial institutions in Ireland. “The easy way to deal with holes in the balance sheet is to cut staff but this is not always the best solution and is more of a knee-jerk reaction,” said its spokesman Seamas Sheils.

A spokeswoman for the careers office at UCC said commerce and finance graduates are finding it “very tough” out there.

An ex-Bear Sterns worker said he lost his Dublin-based job last year when the bank cut 100 Irish jobs.

“I moved from Merrill Lynch to Bear Sterns in 2005 and there was a great choice of jobs out there. You could apply for around 150 to 200 jobs. There was jobs everywhere.

“I have been unemployed now for over a year and it’s horrible out there, really terrible. At this stage, I would take anything and a pay cut. I’ve had a few interviews but there’s so much competition for so few jobs,” he said.

Stockbroking firm Davy is not ruling out the prospect of more redundancies, saying banks have not gone far enough with their cost-cutting measures.

The International Monetary Fund believe Ireland’s banks face losses of as much as €35 billion this year and next. Banks will have to claw back some of these and job cuts is one of the ways of doing it.

Another is a hike in charges and fees. Yesterday, head of the Irish Banking Federation, Pat Farrell, said the sector needs to get back “to the real business of banking”.

With Halifax — described by Eddie Hobbs as the “Ryanair of the Irish banking sector” — out of the picture, it leaves less competition in the market.

Banks won’t have to compete as aggressively for business if there are fewer players. Less competition leads to higher charges. It also means banks could become even more keen to hike interest rates.

The Government has been urged to do something about the banking sector mess. However, just like it did when pressed about interest rate hikes, it is shrugging its shoulders, saying there’s not really anything it can do. And perhaps they are right. Banks are businesses. Whatever issues there are about the way they treat customers, they, at the end of it all are in the business of making profits.

When the dust settles after loans are transferred to NAMA, expect more job cuts, higher charges and rising interest rates as banks get back to the business they know — making money.