Merger Trauma - Don't Bank On Jobs For Life

Sydney Morning Herald

Friday October 25, 1996

ANNE LAMPE and TOM ALLARD

Some 1,000 staff will lose their jobs in the St George Bank and Advance Bank merger. If major bank takeovers go ahead next year, another 35,000-plus jobs will be lost. The brave new world of banking promises work and personal trauma. ANNE LAMPE and TOM ALLARD report.

THE bright career prospects from the promotion to the Commonwealth Bank's head office in Sydney didn't last long.

The senior bank officer was suddenly retrenched. Shortly afterwards he was a trainee carpet cleaner with Grace Bros Carpet Cleaning Services.

The ex-CBA employee, who requested anonymity, is now looking to buy a carpet cleaning franchise with his redundancy pay. Banking as a career is over: he recognises that at 45 years of age, he was competing with thousands of others in similar positions.

His experience is just one of thousands of similarly traumatic white-collar job retrenchment and life readjustment stories littering the job market.

With ANZ about to shed another 5,000 jobs on top of the St George/Advance Bank merger numbers, the wave of bank job losses is escalating.

The Finance Sector Union says some 40,000 banking jobs have gone in the last five years: some 15,000 retrenchments and 25,000 by natural attrition and early retirement. Underscoring this trend is the huge swing to part-time employment in the banking and insurance industries. The proportion of part-time to full-time employees has almost doubled from 9.5 per cent in 1986 to 18.3 per cent this year.

If, as is almost certain, there are to be mergers between the big four banks the FSU estimates that a further 35,000 jobs would disappear in the process of creating two major banking networks.

Until six years ago banking jobs were regarded as providing a guaranteed lifetime career. Now banking employment only offers uncertainty. Line and middle level managers are the most insecure positions, followed by backroom document processors as this function is centralised into massive computerised processing centres generally located in one State.

Branches are closing almost daily. Staff from tellers to branch supervisors are suddenly and urgently looking elsewhere to earn a living.

In bank head offices those at particular risk are the line and middle managers who are not seen as bringing in revenue. "No revenue generation, no job" seems to be the new motto.

Initially the retrenchments only occurred when the red ink ran through bank balance sheets in the recession at the beginning of the decade. However, the job losses from cutbacks were counted in the hundreds rather than in the thousands. The losses were seen as necessary to turn losses into profit.

But in the past three years the big banks have notched up record profits. They are generating incredibly high returns to shareholders - just about double the average rate of returns available in industrial stocks.

Yet, as the profits have climbed, the retrenchments have accelerated in the wake of an almost constant round of reviews and restructuring.

The heavy job losses are being driven by broad economic forces and changes in consumer behaviour which the banks argue leave little choice but to slice staff and branch numbers.

Banks for decades enjoyed lucrative profits on lending, particularly home lending.

This helped subsidise extensive and heavily staffed branch networks.

With low-cost cut-price competitors forcing the banks to reduce profit margins on home lending by about 50 per cent since 1994, banks can no longer afford to sustain unprofitable branches. They are on a huge drive to improve productivity.

According to research by management consultants McKinsey and Co, Australia has an exceptionally high number of branches per head of population, about 500 per million inhabitants compared with the US ratio of about 300.

As a result, the productivity of the local banking industry is only 60 per cent of the US.

The solution? "Reduce branch numbers by 40 per cent or some 3,600 branches," says McKinsey and Co.

Potential savings from closing branches are in order of $3.6 billion. Research from merchant bank Hambros estimates every transaction in a branch costs $1. This compares with 50c over the phone, 25c through an ATM, and between just 1c and 2c for transactions performed on a personal computer.

Consumer behaviour is changing. According to research by National Australia Bank, about 90 per cent of transactions were done in branches 15 years ago. Now due to the introduction of ATMs, EFTPOS in shops and supermarkets and telephone banking, only 50 per cent of transactions are done in contact with a bank employee in a branch.

But branch numbers are down only 15 per cent from their peak.

Why keep branches when fewer people use them to make deposits - especially with the now standard practice of paying wages and government benefits directly into people's accounts electronically?

And why keep them when consumers are becoming more comfortable negotiating big ticket items like home loans over the telephone or with mobile lenders that meet them at their home, rather than over a cup of tea with a branch manager?

Of course, it is also far cheaper for banks to use the new sales methods.

It's not that branches will disappear altogether. Westpac's Rod Bishop says transactions in branches have actually increased in the past 10 years, they just haven't increased nearly as fast as ATMs and EFTPOS.

But the branches will have to incorporate technologies like video-conferencing, Internet services, as well as the ubiquitous ATM and telephone. The mini-branches or banking kiosks - typically located in shopping malls and even inside the checkout of a supermarket - will be staffed by only one or two people, as opposed to the standard seven to 10 who man a conventional branch.

Commonwealth Bank, Westpac and ANZ are all trialling these new branches and having considerable success. Customers like the convenience, the open layout (no walls, low desks and counters) and are using the ATMs to perform functions that they may have ordinarily asked a teller to transact, like transfering money between accounts.

Looking further into the future, some feel that the bank branch will be largely replaced by a card in a wallet. Smart cards - cards with computer chips that can store cash value and information - have the potential to be the main point of contact between a customer and a bank. People will use them to perform every conceivable financial task, from buying a drink to monitoring an investment portfolio, and store all sorts of personal information like medical records and frequent flyer points on the card.

The cards are convenient. Palm-sized smart card readers can be carried around anywhere; most merchants will have terminals which will allow the card to buy goods and services; computers, telephones and TV sets will accept smart cards and facilitate almost every function that is done in a branch.

A bank branch in a wallet: and there aren't many jobs in that.

Attention on the next round of job losses centres on St George and Advance. For the combined 8,900 employees, "integration" is the new fear word.

It means there is room for only one person where previously two perfectly good and productive jobs existed. Some 80 branches will be closed in the quest for a $140 million-a-year cost saving. The trouble is that no-one knows whose job is on the line. And is St George telling the truth on the numbers?

The FSU has had discussions with St George chairman Jim Sweeney to extract an undertaking that there would be no forced redundancies and that established redundancy agreement processes will be followed.

"We want to know why the number of 1,000 is so magic, exactly what plans do they have, and where the branches they intend to close are," said Geoff Derrick, the FSU's assistant secretary in NSW.

The FSU has also recently met ANZ management over the retrenchment of 100 staff in the bank's head office in Queen Street, Melbourne, and a further 5,000 job losses scheduled over the next six months.

Contrary to an enterprise agreement between the bank and its staff, the selected employees were told that they need not work out their six-week notice period.

Instead they might as well go home, because they would not be redeployed. Two information technology employees were escorted from the building in case they considered tampering with the computer systems.

The union took the bank to the Industrial Commission where the matter was referred back to the parties for further talks.

"For people who have been loyal, long-term employees, that is devastating," Mr Tony Beck, the assistant joint secretary of the FSU, said. "But a more devastating consequence is that every other staff member that has worked side by side with those people can see that they have been treated like dirt.

"And this is a bank that in 1992 made a $500 million loss, and by the end of 1995 they turned in a $1 billion profit.

"And they are on track this year to record another $1 billion profit. Their return on equity on shareholders' funds is higher than any of their major competitors.

"If you are a shareholder in the banking sector your return has been about twice the return on any other shares.

"Wages and inflation are now low but shareholders are receiving extraordinarily generous returns from this sector and from this bank. And long-term employees are entitled to proper consideration," Mr Beck added.

Where do scrapped bankers go? Mr Derrick pointed to non-bank mortgage lenders picking up some ex-bank employees with lending, customer service and telemarketing skills. Service industries also provide homes for the last two skills. Others telemarket insurance products or become financial advisers. Among the businesses purchased are food franchises, cafes and newsagencies.

"A lot of them are men in the 40 to 50 age bracket, with 20 years in the finance sector, no formal qualifications, although a lifetime of experience who find it difficult to move into another industry or another job," Mr Derrick noted. "They tend to be in the category who find it most difficult."

Others use the lump sum to pay off the mortgage, reduce household debt and play golf every day.

Other areas that are absorbing ex-bankers with the right skills are telephone banking and centralised high technology document processing.

There is also a rising demand for part-time employees.

"The problem there is that well over 90 per cent of that part-time work involves low-skill, low-pay, low-career path jobs, with American-style management in which they count the number of customers who come in per quarter hour and roster people to deal with exactly that number of people per quarter hour.

They work without a break during their rostered time and then they go home," Mr Derrick said.

According to Tony Beck the constant downsizing and restructuring is causing morale problems inside banks at the very time banks are talking about improving customer service and generating business.

Michael Markiewicz, the managing director of recruitment agency Hamilton James & Bruce, noted that processing and clerical employees have the hardest time finding new jobs. He identified senior people with specialised skills in treasury, lending and information technology operations as having the best prospect of finding another career path.

Age is another factor. A senior Westpac banker lamented this week that since he turned 50 he has not had one call from a headhunter. This was in stark comparison to several approaches he received when he was up to 10 years younger.

Bill Manning, the national recruitment partner for Coopers and Lybrand, identified customer service skills as the most portable within the sector or telephone customer service. "They are the fastest growing jobs in Sydney at the moment.

"Your prospects are improved if you possess computer skills."

Contracting is another option. But it usually means lower real income as the former employee picks up his or her own sick leave, holiday leave, office rent and superannuation costs.

"Period contracting work is one of the fastest growing industries," according to Mr Manning.

"Professionals, such as accountants and computer professionals are doing quite well, whereas if you want to obtain a position as a line manager where you might be in charge of 40 or 400 people your chances are not good at all.

"The reason for this is that companies are shedding everything but their core activities and they are outsourcing by hiring in consultants and contractors as advisers and that is a trend that has been gathering momentum since 1983. That applies to legal and property services personnel who are picking up some of the slack of those who have been retrenched. There are no property officers in banks anymore. Others have moved from a large organisation to a small organisation providing advice.

"In terms of senior executives another avenue is that they have moved overseas, particularly into South-East Asia."

Drake's national manager career transitions, Ms Serenella Tonello, said administrators and pen-pushers had the hardest time redeploying. "They are often too inwardly focused and there are not too many middle management jobs in the market. These have probably been reduced by 35 to 40 per cent."

Line managers need to be more business-development oriented to survive.

Simply managing people these days is not enough. Often, Ms Tonello said, redundant employees who have been in the same job for a long time lack confidence and find it tough to change track.

"They can't sell themselves and they need help to do that. They are often emotional, don't have the right attitude and need to move it or lose it. I say to some of them you've just got to get the roller skates on here or you will be left behind."

LIFE AFTER THE BANK - TALES FROM THE REDUNDANT

After 32 years with the State Bank, Brian Walker in August found himself redundant as an account officer in the Wagga Wagga branch's asset management division. Soon afterwards, he was in business running Turvey Tops Cakes, a cake and sandwich shop.

Mr Walker, 49, confesses he doesn't miss the bank. He now works long hours, 6am to 6pm, five days and half a day on Saturday. But Mr Walker said the bank hours were also long, often 6am to 6pm and sometimes later. And he took the worries home as well.

"I just have to look after myself now, which is tremendous. There's life after the State Bank, I can tell you that," he said

"I didn't even try for a bank job. I did apply for a job, as a credit administrator with a local company, but never even got a reply to my application."

He heard about the sandwich shop, "looked into it and away we went".

The business was bought with his redundancy money. "I didn't even have to touch my super," Mr Walker said with barely disguised glee. "I feel 20 years younger."

Mr Walker explained how at the bank he was looking after difficult accounts, including local farmers and small businesses at a time when many were finding the going tough. He found the process "quite stressful".

His former banking experience has helped in his new business. "I have done cash flow figures and am keeping figures on the business when no-one has kept them before. So I know from day to day what is going on."

Some of Mr Walker's other redundant colleagues have not been so fortunate. One, aged 51, is still looking for another banking job 10 months after losing his last job. Another colleague contracted his services to the bank in Canberra, moved his family there and was recently told that the work the Canberra branch was doing was moving to Sydney. "So he is out of a job again."

Four years ago and aged 43, Mr Hans Schajermann, at the time the manager of the Esanda branch in Bendigo, Victoria, was told his services were no longer required. He had been with the ANZ group for 19 years, the last three in Bendigo.

The job loss left him shocked, disillusioned and depressed. His first step was to pay off the home mortgage. His wife Pat was working as a nurse in the area and the three children were settled in local schools. He set about finding a local job. After a few months reorganising his finances and moving house he found part-time work as a tax accountant with a local tax agent, having majored in accounting at university.

"We wanted to stay here because Pat was working and if I had gone back to Melbourne where there might have been more jobs, Pat would have lost her job here. So we decided to stay in Bendigo where we were at least assured of her income," Mr Schajermann said.

After applying for several other positions locally and looking at several business opportunities, Mr Schajermann found work as a purchasing officer with a large local stationer, only to lose that job, along with three others, 18 months later when Big W set up a stationery department which almost immediately snapped up a large slice of the stationer's market.

He is now back working half days preparing tax returns.

"The upside (to the redundancy) was that the job had been stressful. You had high targets and the bank was always increasing them. They were ready to jump on you if there was a bad debt. There was no support anywhere for the managers.

"It gave me an opportunity to try something else. We got a redundancy package, something like $68,000, as well as the super and that enabled me to pay off the house, buy a car, buy some shares and look for a business opportunity.

"A lot of people lose their job and get nothing. There were people in the bank who got pissed off and left of their own accord and they got nothing. If they had stuck around to get the bullet they would have got a payout."

The downside included not knowing what to do after a long career in banking and finance. "You work pretty hard and thought you were doing a good job and that sort of thing happens. It does not make you feel great.

"But it is not the end of the world either. With my wife working it was that much less pressure to get another job quickly. I was doing a lot of applying for jobs but did not really get anywhere.

"You put a lot of work into looking and nothing happens," he said.