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BIG BANKS TO SLASH THOUSANDS OF JOBS
By Kimball Cariou
(This article is from the December 1999 issue of People's Voice, Canada's leading communist newspaper. Articles can be reprinted free if the source is credited. Subscription rates in Canada: $25/year, or $12 low income rate; for U.S. readers - $25 US per year; other overseas readers - $25 US or $35 CDN per year. Send to: People's Voice, 706 Clark Drive, Vancouver, Canada, V5L 3J1.)
PROFITS ARE GOING through the roof for some of Canada's biggest banks. But instead of sharing the wealth with their employees or cutting service fees, the banks are wiping out thousands of jobs.
On Nov. 19, the Royal Bank announced profits of $1.76 billion for fiscal 1999, down just slightly from the 1998 figure of $1.82 billion. On the same day, Royal chairman John Cleghorn promised to slash 6,000 jobs by the end of 2001, as part of a drive to reduce costs by $400 million.
In September, news reports said that as many as 7,000 positions would be wiped out at the Royal, but the bank dismissed these "ludicrous rumours." Two months later, Cleghorn admitted 3,000-4000 jobs will be eliminated next year, and another 1,000-2,000 in 2001, almost 12% of the bank's current 52,000 positions.
Toronto-Dominion announced even bigger 1999 profits in November, the largest ever by a Canadian bank, a staggering $2.98 billion. TD had already said last summer that it will slash 4,900 jobs when it takes over Canada Trust.
The Bank of Montreal announced in October that it will eliminate 1,450 jobs to cut costs. While the CIBC has not issued similar workforce downsizing predictions, it plans to cut costs by $500 million annually, spelling the end of thousands more jobs. The total scope of job losses over the next two years at the big banks is expected to top 15,000.
Financial analysts predict that the Royal and TD figures will carry the industry to a fifth straight year of record profits. After racking up total profits of $7 billion in 1998, the six major banks are headed for $8 billion or more this year.
Even so, the banks and the corporate media claim that profits are not high enough. A business reporter for Conrad Black's Vancouver Sun wrote recently that "Another cause for concern is the Royal Bank's sharp drop in return on equity, a key ratio used to gauge bank profitability. The figure fell to 15.6 percent, from 18.4 percent last year. In comparison, the TD Bank's return improved from 18.3 percent this year from 17.6 percent."
A mere 15 or 18 percent return on equity? That certainly seem attractive for wealthy investors. While TD Bank share prices have fluctuated sharply during 1999, they are now in the $36 range, far higher than the $25-$26 of December 1998.
Yet the truth is that capitalist competition is indeed driving these massive job losses. In 1970, the Royal Bank was 12th in the world in terms of bank assets. Today it ranks 57th. The dizzying pace of mergers and takeovers in the global financial industry continues to create mega-banks and corporations on a scale inconceivable a decade ago. To survive in the capitalist jungle - or in other words, to reap profits equal to those of the competition - Canada's big banks are desperate to keep shutting down less profitable outlets and build on what they consider their "core operations."
Four of the five biggest banks also tried to force the Chretien government to let them merge, a demand which was turned down because the banks are so widely hated by their own customers, i.e. Canadian voters.
But Ottawa is about to give the banks a "consolation prize": permission to increase their levels of foreign ownership to 20 percent, up from the present 10 percent. Legislation along these lines will be introduced next year, according to the business media. Already rumours are circulating that Chase Manhattan, one of the biggest US banks, will buy 20 percent of the Royal or one of its Canadian rivals.
That would give Chase Manhattan a virtual controlling interest. As Eric Reguly wrote in the Nov. 19 Globe and Mail, "In time, Chase and Royal would become fully integrated, with Chase, of course, using its sheer heft to get its way. While Royal's official headquarters would remain in Toronto, more and more senior executive and managers would move to New York. Eventually, the Canadian headquarters, like Nortel's, would be hollowed out to the point that it would be little more than a PR gesture to Ottawa. Within ten years, the intersection of Bay and King streets in Toronto could make downtown Buffalo look like Paris."
Tens of thousands more jobs lost, and another shattering blow for the remnants of Canadian sovereignty. That's the direction the Big Banks are taking us, in the name of higher profits. Welcome to capitalism in the third millennium!
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