When a company decides to cut costs, they usually start with people. This is because it’s not possible to sell partial of its fixed assets and which is often needed to continue its operations. Besides hiring back staffs may be much faster than to order a new machinery for example. All over the world, we see the trend repeating itself. With advancements in technology, fewer people would be needed, especially banks. National Australia Bank (NAB) retrenched 1 out of every 5 employees and they have started leaving the bank beginning last week. That’s a 20 percent cut as more automations meant fewer staffs are needed. NAB’s annual net profit announced in November 2017 was A$5.3 billion (RM16.14 billion). Here’s that news in abc.net.au Before everyone panics, it’s not all gloomy with the banking though, if your skill is what they need. At the same time that NAB is letting go 5,000 staffs, they are hiring 2,000. These 2,000 are the highly skilled in finance people. Most of the time, hiring new meant that there’s little time needed in retraining the existing staffs, assuming the skills could be taught.
In the UK, 5,000 staffs of HSBC lost their jobs out of a total of 45,000. Another 2,000 lost their jobs in HSBC in the U.S and a few other countries. The bright spot is, HSBC continues to hire in this part of the world. It continues to hire in Hong Kong even if the overall number of staffs worldwide has dropped 5 percent. Full report here. Barclays Plc may be letting go up to 100 senior staffs at is investment bank due to its underperformance. I think salary wise, these 100 senior staffs would be worth a few hundred lower paying banking jobs. Here’s that report in Bloomberg. (If all these staffs who lost their jobs are unable to get back a similar paying job for a few months, their savings would be depleted and some may start skipping their mortgage payments. Hopefully these do not happen since the current job market is pretty robust based on the usual unemployment rates)
Over in Malaysia, a total of 1,123 staffs applied to be given the Mutual Separation Scheme (MSS) by AMMB Holdings Bhd. This is 12 percent of the bank’s workforce which is pretty significant. The savings from this, RM80 million per year will be reflected from the financial year ending March 31 2019 onwards. The payout for this MSS is estimated to be RM128mil which will be accounted for in the fourth quarter of financial year 2018 Q4FY18. The banking group announced a net profit of RM878.7mil for the nine months of FY18. The savings will help the profit numbers in the future. CIMB Research has a ‘buy’ for AMMB because of the attractive valuations of FY19 price earnings of 8.6 times and price t0 book value (P/BV) of 0.7 times. its target price is RM4.30 while shares of AMMB closed 4 sen lower to RM4.10 at mid-day. Here’s that full report in TheStar.
Please always keep track of people losing job because this is one of the indicators of the property market. Without a stable job, there’s no way people could buy a property or even pay for their existing mortgage(s). If you like banking stocks, perhaps this is one that you may buy and hold since savings from this MSS would be continuous moving forward and not just for 2019. Happy investing.
written on 1 Mar 2018
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