Tags: Whitney | Banking | Industry | Jobs

Meredith Whitney: Banking Industry to Shed Another 50,000 Jobs

Tuesday, 31 July 2012 01:16 PM

A shrinking banking industry is not finished cutting jobs, so expect layoffs in the sector to climb by another 50,000, said noted banking analyst Meredith Whitney, chief executive officer of Meredith Whitney Advisory Group.

The banking industry will continue to shrink as the businesses and households shed themselves of their debts, while the housing sector can't pump revenue into the industry any longer.

"The old way of making money for Wall Street for so many of the banks that became real Wall Street-driven revenue machines is gone," Whitney told Bloomberg TV.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

"And that was driven by the unsexy world of housing and leverage, and the world is deleveraging, at least the post-modern world is deleveraging, so it puts real sustained pressure on revenues, and the business models just have to shrink," Whitney said.

"There's no mortgage [business] for the industry — for investment banking — to ride on the shoulders of anymore, so it's really the investment-banking side that has to shrink dramatically."

The housing sector channeled in a great deal of business for the sector by boosting fixed-income operations and fueling demand for mortgage servicing and collection units.

Those days are over, and even demand for capital markets services isn't what it used to be.

"There's just not a lot of business, and these are high-paying jobs," said Whitney.

"I think the industry goes for another 50,000 [job cuts]."

In 2007, Whitney predicted the subprime-mortgage collapse would force Citigroup to cut its dividend and raise capital, making a spot-on call that gave her rock-star status among equity analysts after initially receiving heat for making the prediction.

In January 2008, Citigroup cut its dividend and the stock would eventually lose more than 95 percent of its equity value until government support would prop it back up.

Meanwhile, Deutsche Bank earlier Tuesday announced it was firing 1,900 workers in an effort to save 3 billion euros ($3.8 billion).

"As an immediate action to adjust the platform to the current environment, Deutsche Bank will reduce headcount predominantly outside of Germany by approximately 1,900 positions, including 1,500 positions in Corporate Banking & Securities and related infrastructure areas," the financial institution said in a statement.

"These measures are expected to contribute savings of approximately 350 million euros of the overall 3 billion euro target on a run-rate basis."

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

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Tuesday, 31 July 2012 01:16 PM
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