Bank of New York Mellon Corp. said Wednesday that it will cut about 1,500 jobs, or 3 percent of its work force, the latest sign of the banking industry's painful shrinking.
CEO Bob Kelly noted that the bank's revenue had been growing but added that "expenses have been growing unsustainably faster." The bank said it hasn't yet determined what types of jobs will be cut or where. It said it would try to minimize layoffs with a hiring freeze and by reducing the use of temporary workers, consultants and contractors.
The banking industry also resorted to layoffs during 2008 and 2009, as the financial crisis pummeled earnings and banks took government bailouts. But 2010 provided some relief, and banks even hired back some of their laid-off workers.
Banks have been cutting jobs again in recent months. Goldman Sachs Group Inc. and State Street Corp., among others, each announced last month that they would lay off about 3 percent of their work forces.
What makes these cuts different from the layoffs of 2008 and 2009 is that they're coming at a time when many banks are actually posting improved profits. Analysts say the latest cuts point to permanent structural changes as the banking industry becomes smaller, less risky and also less profitable. Many of the complicated investment vehicles that fueled earnings before the financial crisis are gone, banned by new regulations meant to prevent another global collapse.
Nancy Bush, a contributing editor at SNL Financial, predicted that layoffs will intensify when banks start determining bonus payments around the end of the year. "The tendency has been to lay off when times are bad and rehire again when times are good," she said. "I don't think we're going to get Part B this time."
The U.S. banking industry employs about 2.09 million workers, according to calculations by SNL Financial. That's down about 5 percent from 2.21 million at the end of 2007.
A spokesman for BNY Mellon said the layoffs had been planned "for some time" and weren't related to the banking industry's recent hammering in the stock market or by the Federal Reserve's announcement Tuesday that it would keep interest rates near zero for at least the next two years.
The low interest rates are meant to stimulate the economy, but they can also hurt banks because the banks make less money on their investments. And though the entire stock market, not just the banking industry, has been slammed because of broad concerns about the U.S. economy, investors are especially worried about banking.
The industry's credit problems are easing, in contrast to the depths of the financial crisis, but investors are wondering how many more lawsuits and regulatory probes could be filed against the banks, particularly around their selling of subprime mortgages and mortgage-backed securities before the financial crisis.
BNY Mellon, the country's sixth-largest by assets, has flown under the radar for much of the financial crisis, losing money in the third quarter of 2009 but otherwise staying profitable. Last month it beat analysts' estimates for second-quarter revenue and per-share earnings.
Its shares fell $1.04, or 4.9 percent, to $20.05 in afternoon trading Wednesday.