ARE WE BANKING ON THE RIGHT NUMBERS?

Why the banking sector needs to make work/life balance part of the P/L sheet

By Maite Barón, CEO, The Corporate Escape

Numbers are at the heart of the finance and banking industry, but as we enter a new year, some of the figures for those working in the sector aren’t looking too rosy.

The number of bankers in employment is still on the slide, with the head count in the UK investment banking sector standing at about 80% of what it was at its peak in 2010. That decline looks to set to continue for a while yet, with employment in the top ten firms set to ratchet down another 3,000 by the year end, according to Deutsche Bank – seemingly all part of a global trend, with further predictions that the investment banking industry worldwide will be 20,000 slimmer by the time we hit 2015.

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Maite Baron
Maite Baron

On a wider financial front, future prospects hardly seem more comforting, with European banks in particular eradicating whole swathes of business from their portfolios. UBS for example, is largely turning its back on debt trading, with a consequent loss of some 10,000 jobs.

Bankers’ pay, long the target of political and public ire, is also heading south, even before the might of Westminster has had a chance to properly squeeze it. Average pay at firms such as Goldman Sachs and JPMorgan Chase was down around 5% in the first three quarters of 2013, with pay as a whole for the largest investment banks pretty much flat-lining.

Down too are investment banking revenues, mirroring what’s happening to headline pay, with data-provider Coalition pointing to a corresponding 5% drop in 2013, as profitable ‘over the counter’ derivatives trading is forced out of the shadows to be conducted in the full glare of the exchanges and clearing houses. And balance sheets are also on the slide, as higher capital requirements and tighter regulation about banks trading securities for their own profit start to bite.

Of course, with banks looking to make savings, costs are also dropping, but not as fast as revenues.Given the high built-in overheads of computer systems and compliance departments, cutting expenditure was always bound to be a ‘lumpy’ experience,with a simple head cull of bankers never likely to lead to a proportionate reduction in large and established outgoings.

In this landscape of falling revenues and less steeply declining costs, it’s unsurprising that profits are tumbling – last year McKinsey revealed that for the largest investment banks, the average return on equity had dipped to a threadbare 8%. However, this much-reduced figure will look positively plump if predictions of a barely breathing 4% in five year’s time comes to fruition.

That said, for those who do manage to hold on to their jobs, bankers’ pay may well enjoy a short term uplift, as the sector takes a pragmatic approach to negate the impact of EU legislation on banking bonuses and either bumps up basic salaries, or finds other creative ways to exploit loopholes or work around the new restrictions.

However, the benefit of these measures may be transient if shareholders, fed up after taking the hit of previous years’ extravagance, turn off the tap in an effort to claw back some of their former losses.

On a more personal level, also down – thankfully so for those who have to endure them – are the hours that junior bankers are being asked to work, with Bank of America Corporation joining Goldman Sachs and JP Morgan in allowing those on the lower rungs of the ladder to have at least one weekend off a month. That will give some a glimmer of light at the end of a very long tunnel that commentator Roy Cohen, author of The Wall Street Professional’s Survival Guide, describes as “one of the last forms of legalized slavery.”

It is something of an anachronism associated with the financial sector (though not exclusive to it) that, when the personal and corporate benefits of a good work/life balance are so widely recognised, as is the fact that stress and burnout dramatically affect performance, offering just one weekend off a month is deemed acceptable,or indeed a ‘bonus’.

But if that’s down side, what’s on the up?

Well, the sector may not be having its finest hour, but the contribution that finance is still making to UK plc, is unquestionable, with its £46.3 bn in 2013 making it the largest contributor to the country’s trade balance, well ahead of the professional services sector (£9bn) and computer and information services (£5.1 bn).

In one of those economic paradoxes that accompanies this fundamental restructuring, while jobs are still being shed from the sector, financial services employment has grown at its fastest rate since 2007 as recovery takes a wider hold, according to a forecast by the CBI/PwC. This would take employment up to 1.16 m, still a not inconsiderable 52,000 lighter than at the end of 2008, but a more heartening prospect.The CBI/PwC viewpoint is also supported by other data from financial recruiter Morgan McKinley, which shows new job vacancies in the City to be up over 50% compared with 12 months ago.

So it seems that the banking industry may finally be starting to shed the legacy of all that it has been through in the last few years. But, with the return to fitness, comes the opportunity for a reinvigorated sector to address the issue of ethics and values behind its decisions, and that includes the well being of those who serve it.

Only then, when we talk or write about banking and finance, we will be able to focus on the numbers and nothing else.

Making numbers work is fundamental in finance, but must it be at the cost of quality of life and health? Anyone thinking of embarking on a corporate career should consider all options, especially when so many rewarding alternatives are available, thanks in no small part to advancing technology.

At The Corporate Escape, preparing professionals for success in a future world of work is our passion, so why not start by download our free guide – ‘7.5 Strategies to Thrive in Your Career or Business’.And for more valuable resources on how to break free and find independence outside the corporate world, go to TheCorporateEscape.com.

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