Dismal start to the new year likely for Europe’s banks

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MORE JOB losses, a further squeeze on lending and a fresh wave of asset disposals are on the cards as Europe’s banking sector heads into the new year.

Almost two-thirds of UK lenders expect a reduction in headcount in the first half of 2013, while more than 50 per cent are looking to sell assets in the next six months, according to a major survey published today by accountancy giant Ernst & Young.

Head office and administrative functions are expected to be the areas most heavily hit by the cost-cutting, which comes despite rising optimism among bankers.

Steven Lewis, lead global banking analyst at Ernst & Young (pictured below), said: “The anticipation of regulatory-driven structural change is forcing banks to reconsider their business models and some job losses will be inevitable as banks focus on smaller number of core areas.”

The European Banking Barometer is a biannual poll of 270 banks across Europe, including Austria, Belgium, France, Germany, Italy, the Netherlands, the Nordic countries, Poland, Spain, Switzerland and the UK. The UK respondents represent almost 80 per cent of the total assets of the region’s banking industry.

Cost-cutting and minimising “non-essential spend” were found to be among the top priorities for UK banks.

Some 64 per cent of firms anticipate a fall in staff numbers in the first half, compared with just 12 per cent six months ago. More banks expect to make headcount reductions in the UK than in mainland Europe.

Lewis added: “Banks are expecting the economy to pick up, which should help them with deleveraging through asset sales.”