Citi, Wells Fargo, Morgan Stanley join EU banks in pausing job cuts

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Thousands of bankers are set for a reprieve as Morgan Stanley and Citigroup joined European lenders in pledging to preserve jobs amid the widespread impact of the coronavirus.

Citigroup will suspend any planned job cuts, according to a person familiar with the matter. And Morgan Stanley Chief Executive Officer James Gorman told employees in a memo Thursday that the bank won't trim the workforce this year. The New York-based banks are seeking to reassure employees as the pandemic roils markets and raises the prospect of deep losses industrywide.

"I am sure some, if not many, of you are worried about your jobs," Gorman wrote. "While long term we can't be sure how this will play out, we want to commit to you that there will not be a reduction in force at Morgan Stanley in 2020. Aside from a performance issue or a breach of the code of conduct, your jobs are secure."

Wells Fargo, the firm with the biggest workforce among U.S. banks, also suspended job cuts. "We have paused initiating new displacements," Beth Richek, a spokeswoman for the San Francisco-based lender, said Thursday in a statement. "We will continue to evaluate during this fluid situation."

HSBC is putting on hold as many as 35,000 job cuts while Lloyds Banking Group halted its plans to trim around 780 positions. And Deutsche Bank AG, Germany's biggest lender, said Thursday that it would pause future job cuts in the middle of a restructuring that aims to cut 18,000 positions by the end of 2022.

"To avoid additional emotional distress in the current environment, we will defer new communications of individual restructuring actions to potentially affected employees," Deutsche Bank said in a memo to staff seen by Bloomberg. "The pause will be in place until we see a return to greater stability in the world around us."

Credit Suisse Chief Executive Officer Thomas Gottstein said that the Swiss bank won't announce any layoffs because of the virus, while Commerzbank AG and Societe Generale SA may slow the pace of cuts.

The need for steep cuts at European banks is more acute, where such measures are a major plank in their plans to restore lackluster profitability or bolster shareholder payouts. At the same time, they're now set to receive unprecedented help from governments and regulators, making it more politically sensitive to put people out of work.

Still, the change of heart isn't universal. UniCredit SpA is in active talks with worker representatives over its plan to cut 6,000 jobs in Italy and a deal may be in place next month, a union official said. The bank has said most reductions will come through attrition and early retirements.

Royal Bank of Scotland Group Plc Chief CEO Alison Rose is sticking to her plans to slash the bank's markets business, people with knowledge of the matter said. In February, the state-controlled lender said it will restructure NatWest Markets, without specifying how many jobs will go. The unit accounts for 4,500 of the group's 65,400 staff, according to 2018 filings.

"Because of the extraordinary impact of the Covid-19 pandemic, we have decided to pause, for the time being, the vast majority of redundancies associated with this program where notices have not already been issued," HSBC CEO Noel Quinn told staff in a memo on Thursday.

Banks are seeking to show that — contrary to the last financial crisis more than a decade ago — they are now in a position to help countries deal with the unprecedented impact of the virus and its economic impact through ensuring that credit keeps flowing. They are also receiving government aid on loan guarantees and waivers to tap into their capital buffers to help them weather the crisis.

"At this uncertain time, we have made the decision to stop the structural changes that were due to take place for some of our teams," a Lloyds spokesperson said by email. "Our focus is on supporting our customers and colleagues during this unprecedented time."

The challenge of negotiating with labor unions — an essential step in most German headcount reduction programs — while most people are working from home could pose an operational challenge to the bank's plans, Commerzbank Chief Financial Officer Bettina Orlopp indicated on a conference last week.

"Ms. Orlopp has indicated that job cuts may happen more slowly in the current circumstances," Stefan Wittmann, a union representative serving on Commerzbank's supervisory board, said by email. "In our view, that would be the right thing to do."

The delayed job cuts put at risk the restructuring efforts under way at many banks at a time when stress in the financial system is rising. Moody's on Thursday downgraded the credit outlook for large swathes of Europe's banking industry as it predicted rising loan-loss provisions coupled with a strong decline in revenue that will further erode the sector's profitability.

"I don't think it's in this kind of situation that we're going to announce restructuring measures," Societe Generale CEO Frederic Oudea said at a conference last week. "There is a question of decency."

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