Industry Jobs Will Decline By 100,000 in '92, Study Says
The U.S. banking industry next year will eliminate 100,000 jobs, or 6.7% of its work force, a management consulting firm estimates.
The prediction by Cresap, a New York-based affiliate of the Towers Perrin group, is by far the most dire by industry analysts. It is based on assumptions about continuing bank mergers, restructurings, and outsourcing of operations.
Most other experts are projecting job losses for all depository institutions next year of only 20,000 to 30,000. The most bearish forecasts do not exceed 50,000.
Dim View of the Year 2000
Andersen Consulting and the Bank Administration Institute recently concluded that over this entire decade, employment will decline by 250,000.
There were 1.49 million bank employees as of Sept. 30, according to bank regulatory filings. The commercial bank total is about 70% of all employment in the financial services industry.
Cresap said about half of the lost jobs next year will be in the teller and administrative support areas, while the remainder will be technical specialists and mid-level managers.
"Banks need to and will shed people who do not add to an institution's core competencies," said David M. Partridge, a director of Cresap. "For the survivors, the work will be tougher, but potentially more rewarding."
Some Major Disagreements
Data from the Bureau of Labor Statistics show that all depository institutions lost 31,000, or 1.4%, of their 2.236 million jobs in the 12 months ended Oct. 31, 1991.
This net loss is based on reductions that include 17,000 for commercial banks and 16,000 at savings and loans, offset by gains such as 4,000 new jobs for credit unions.
Cresap estimates that commercial banks may have lost as many as 36,000 jobs this year, Mr. Partridge said. That would be more than double the amount indicated by Federal Deposit Insurance Corp. data for the first nine months.
Mr. Partridge conceded that his estimate of another 100,000 cuts next year "could be high by 15,000 to 20,000."
Coming Attractions: Mergers
He predicted there will be another spate of bank mergers next year, most of them orchestrated by 20 banks with "the strongest balance sheets and reasonable" stock-price multiples.
"Their other avenues of growth are limited, so it's inevitable that they will continue to purchase their way towards critical mass, particularly in consumer and small-business banking."
Also in its scenario for 1992, released Thursday, Cresap foresees a major money-center bank stumbling "badly," although it declines to identify the candidate. And the firm said 15% to 20% of credit card issuers will exit that business.
Mr. Partridge said the 20 wealthiest credit card institutions will be buying up the business, which will get more competitive partly due to the strength of nontraditional competitors.
The thrift industry could be in for another tumultuous year, according to Cresap. The firm said a rise in interest rates as the economy strengthens would shrink the thrifts' spreads, which have been running at an unusually wide 280 to 290 basis points.
"A major upturn would shrink that to 130 or so, causing a drop in portfolio profitability that will bury the walking wounded," said Mr. Partridge.
A rise in interest rates "could cripple most thrifts under $10 billion in assets," Cresap said. It also predicted the creation of a $100 billion-asset thrift and a growing interest in thrift acquisitions by Japanese-owned banks in California.