Banking on less

Digital banking: It is changing the way banks operate and manage their employees.

Digitisation and automation in the global banking sector coupled with an environment of low interest rates and slow capital market activities have changed the way employees are being managed.

These days, it is no longer a shock to learn about global banks shedding a high number of their workers.

Just last week, it was reported that almost 30,000 layoffs have been announced over the past four months at HSBC, Citigroup, Barclays, Société Générale and Deutsche Bank.

The phenomenon – if it may be thought so as one – is apparent within the investment banking sector where deals have been drying up and investor-appetite affected by all kinds of external headwinds like the US-China trade war and Brexit.

To be fair, the financial industry is not the only one keeping a firm lid on human resource costs amid a global slowdown.

“Cutting human capital costs to maintain or increase profits has not only become the new normal but it is now a necessity almost everywhere, ” a corporate player quips.

Being cautious

In Malaysia, banks are equally cautious.

In fact, they have been trimming their workforce since a few years ago to bring overall costs down via mutual separation schemes (MMS) and the likes.

The country’s largest lender by asset size, Malayan Banking Bhd (Maybank) believes that the global banking sector will face a situation where eventually a minimum 30% of jobs will converge or “evolve” largely due to digitisation and automation.

Group chief human capital officer Nora Abd Manaf says the size of Maybank’s workforce has been on a decreasing trend since 2012, primarily from natural attrition and the “discipline of good practices” which included no-automatic backfill and hiring first from within, as well as reconfiguration of roles to allow for opportunities for its people to take on new tasks and learn new skills.

Within the industry, she believes more should be done when it comes to allowing employees to work a higher number of flexi hours as an alternative to direct shedding of staff.

“In 2018, we had 476 employees on flexible work arrangements that included fixed flexible schedule, flextime, tele-commuting and part time, ” Nora says.

According to her, a “holistic work-life integration policy” that the lender employs has enabled it to record benchmarked leading results for its key talent and productivity indicators.

“We continued to increase employee productivity as evidenced by income per employee which increased from RM537,637 in 2017 to RM547,756 in 2018 while profit before tax per employee had also increased from RM233,330 in 2017 to RM252,703 in 2018.”

Unlike its global counterparts, the lender doesn’t have any specific plans to cut jobs for now.

“Our focus remains on increasing productivity and performance through people transformation programmes that include re-skilling to ensure relevance for new and future roles.”

The last voluntary separation scheme Maybank undertook was in 2001, post its merger with PhileoAllied Bhd.

AMMB Holdings Bhd’s (AmBank) group CEO Datuk Sulaiman Mohd Tahir Sulaiman says that while digitalisation has a disruptive impact on banks, job cuts is not the primary approach for AmBank.

As one of the country’s smaller banks, it did offer its employees the option of MSS just last year.

“During our MMS exercise in early 2018, our employees were given the choice to apply for the MSS and 1,200 employees took the option to leave the bank with compensation, “ he says.

AmBank’s MMS exercise last year made up 12% of the group’s permanent workforce with the payout totalling RM128mil. It will result in savings of around RM80mil per year from financial year ending March 31,2019 (FY19) onwards, according to analysts.

Sulaiman says there are no more immediate workforce rationalisation plans.

“But we continuously untrain and retrain our staff to equip them with skills to adapt to the latest requirements in order to meet the needs of our customers.”

For CIMB Group Holdings Bhd, factoring in different markets with different economic cycles into its risk-returns strategy has become part and parcel of its business, according to its group chief people officer Datuk Hamidah Naziadin.

“However, the main factor driving our long-term group-wide strategy and workforce planning is still centred on future-proofing ourselves for the Fourth Industrial Revolution (4IR) and the growth of the gig economy particularly in Malaysia and Indonesia, our two biggest markets, ” she says.

In 2015, CIMB slashed more than 150 jobs out of Malaysia and Indonesia and employed a MSS exercise for the two markets which eventually saw a combined 3,599 employees approved for the exercise.

Earlier this month, it closed down its Hong Kong investment banking operations, citing its existing collaboration with China Galaxy International in that highly competitive market.

Hamidah says over the last few years, CIMB has been focused on hiring skills in critical new areas, as well as retraining and reskilling existing staff with the aim of having at least 15% of its workforce to be digitally skilled by 2023.

At Public Bank Bhd, its managing director Tan Sri Tay Ah Lek says the bank continues to hire new employees as part of ongoing efforts to sustain a “dynamic and experienced” staff force given that the increasing complexity of banking has necessitated demand for the right talent.

According to Tay, despite the challenging economic landscape, Public Bank has not undertaken any major restructuring nor employee separation scheme. “Moreover, although technological advancement is fast emerging and starting to reshape the way banks work, digital banking is at the stage of early development and will over time, advance to reach the stage of extensive adoption and maturity.”

“During this time of evolvement, the banking industry will continue to demand for a strong, knowledgeable and skilful workforce to effectively apply and develop banking technology forward, ” says Tay.

He reckons that banks will need to invest much effort and time before automation starts to have a significant impact on the workforce.

In Public Bank’s case, it is planning to invest RM600mil in the next three years to further enhance its ICT infrastructure, digital capability and knowledge.

RHB Bank Bhd group managing director Datuk Khairussaleh Ramli notes that reduction in the number of its employees in the last 12 months have largely been through natural attrition, the percentage of which is at par with industry indexes, according to him.

However, in 2015, RHB did undertake a cost-cutting exercise to downsize its workforce, citing a slowing economy.

Its exercise saw about 1,800 staff or 13% of its permanent workforce in the country take up the option of leaving their jobs at the bank.

Meanwhile, Khairussaleh says between 2016 and 2018, the banking group saw its transactions and interactions grow through digital channels by 79% while over-the-counter branch transactions declined by 27% in the same period.

He further notes that since the bank’s digital transformation in April 2017, it has hired more than 70 people.

“These are mostly new roles in the digital space such as digital architects, mobile and web developers and data scientists.”

Under the roadmap unveiled last year, it intends to spend over RM200mil over the next three to four years to boost its digital initiatives.

Alliance Bank Malaysia Bhd, the smallest bank in the country, says in addition to upskilling its existing workforce, it is on the lookout for new talents with innovation, digital banking, or data science backgrounds.

“The wave of digitisation will lead to a stronger emphasis on digital and technological upskilling and career transitions, ” says its group CEO Joel Kornreich.

Currently, the bank does not have plans to initiate any out-of-ordinary cost-cutting measures, according to him.

Cropped shot of AfricanAmerican businessman paying with credit card online making orders via Internet. Successful black male holding plastic card making transaction using mobile banking applicationCropped shot of AfricanAmerican businessman paying with credit card online making orders via Internet. Successful black male holding plastic card making transaction using mobile banking application

More challenging

All said, bankers admit that banking will only get more challenging going forward.

According to AmBank’s Sulaiman, a lack of catalysts and external uncertainties are expected to keep the prospects of the banking sector challenging this year.

“These uncertainties are causing concerns of moderate loan growth and soft capital market activities ahead.

“On the revenue side, challenges will remain particularly for non-interest income, ” he says.

“This is especially when virtual banks start to commence operations and competes with existing licensed banks that have bricks-and-mortar branches, ” he adds.

RHB’s Khairussaleh concurs.

“Loans growth is fairly subdued in view of a slowdown in the global economy, and continued margin compression poses challenges to banks’ net interest margins.”

He says while prospects for capital market activities remain positive, he admits that markets are in need of sustained impetus.

“Elsewhere, non-bank players – fintechs and non-bank financial institutions – are providing more choices to customers through greater efficiency, faster turnaround time and customer sophistication.”

He also points out that there is now greater emphasis on compliance, which will require bigger investments and capital requirements on the part of financial institutions, posing yet another major challenge to lenders.

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