Heads of big banks and mortgage companies won't be the only financial services employees whose jobs are likely to fall victim to the worsening credit crunch. Several banks are planning massive layoffs in the wake of the mortgage crisis, and technology professionals in the lending arena probably will not be spared.
Several large banks have announced plans to lay off staff -- mostly in home lending divisions -- in recent months. In October, Charlotte, N.C.-based Bank of America ($1.3 trillion in assets) announced in it would cut 3,000 jobs. HSBC (London; $2.15 trillion in assets), SunTrust (Atlanta; $172 billion in assets), Wachovia (Charlotte, N.C; $557 billion in assets), JPMorgan Chase (New York; $1.2 trillion in assets), Wells Fargo (San Francisco; $445 billion in assets) and Washington Mutual (Seattle; $329 billion in assets) also have said recently they plan to cut jobs. Countrywide (Calabasas, Calif.; $121 billion in assets) is in the process of terminating more than 11,000 employees, about 20 percent of its workforce.
Rounding out the bad news among the biggest institutions, earlier this year, Citibank (New York; $1.2 trillion in assets) announced layoffs of 17,000 employees (not all specifically related to the mortgage meltdown).
Citi officials acknowledge further changes will come in the wake of former CEO Chuck Prince's November departure. "We are engaged in a planning process in anticipation of our new CEO [Vikram Pandit] and our business heads are planning ways in which we can be more efficient and cost effective to position our businesses in line with economic realities," Citibank spokeswoman Shannon Bell said at press time. "Any reports on specific numbers are not factual."
Citi and other banks contacted by Bank Systems & Technology declined to say whether or not IT professionals would be included in their layoffs. However, considering that many banks plan to scale back their mortgage lending divisions, technology workers are likely to be affected.
"Banks with portfolios heavily entrenched in the subprime lending market will suffer the most," says Aite Group (Boston) analyst Eva Weber. "Those banks will be looking to make cuts as they recuperate from huge losses. Layoffs will also occur as some banks exit the subprime lending market and close down those shops."
However, while mortgage IT professionals undoubtedly will be affected, the situation actually may prove beneficial to technology providers. "In the case of huge losses, budgets will also be affected, which may impact IT spending," Weber asserts. "However, depending on the type of project, IT spending could increase or remain steady to help absorb some losses by automating processes and reducing costs. As banks look for different opportunities in the lending market, some IT spending may be essential to help identify potential prospects and adequately and efficiently weigh those opportunities. As one door closes, another may open in terms of IT spending opportunities."
In fact, research from Claymore Partners (Greenwich, Conn.), an executive search and consulting company, finds that financial services IT hiring may be up in 2008. Claymore's 2008 Talent Acquisition survey says that in the coming year financial services firms' needs will be the greatest in the areas of IT and sales talent. IT talent is also the hardest to find, said the survey respondents.
The survey also found that the credit crisis won't have a major effect on future hiring in financial services. The vast majority of the HR executives polled indicated the crisis will have a "slight" impact or no impact on their 2008 hiring plans.