FNB plans to cut 600 jobs, close branches
FirstRand Ltd.plans to close branches and cut jobs at its South African retail-lending unit as customers switch to digital banking and the continent’s biggest lender by market value responds to an economy on the brink of a recession.
Almost 600 positions will be lost at First National Bank, while more than 500 people at the company may be able to apply for other roles, said Vanessa Hattingh, a representative from Sasbo, a labor union which acts on behalf of more than 50% of FNB’s staff. About 10% of the bank’s branches will be affected, with 40 closing and another 31 reducing staff, she said.
The process, started in February, will remove duplication and improve efficiency as more clients use the Internet and mobile phones to transact and FNB increases the use of automation, the company said in an e-mailed response to questions.
“No full-service branches are affected and FNB is continuing to extend its network of ATMs,” FNB said, declining to comment on how many jobs may be lost.
South Africa’s economy has struggled to reduce an employment rate that hovers around 25%, the highest of more than 60 countries tracked by Bloomberg. Growth is forecast to slow to less than 1% this year, knocked by the worst drought in more than a century, falling commodity prices and weak demand from its biggest export market, China.
“If a bank can’t grow its revenues at a decent level, it needs to look at getting cost efficiencies,” said Adrian Cloete, a banks analyst at PSG Wealth. “The banks will try to reduce costs through natural attrition of employees and using smaller, new format branches that have lower rental costs. The operating environment, and therefore revenue growth, has become very challenging.”
FirstRand has cut back on lending and said on March 8 that its growth rate was likely to decline this year. The lender has 716 branches and more than 33,000 employees in South Africa. In the six months through December, FirstRand’s net income rose just 1.7% to R10.5 billion.
“No one ever thought that FNB would have to resort to these measures,” said Bruno van Eck, a trader at Thebe Stockbroking.
The stock closed little changed at 43.75 rand in Johannesburg, reversing an earlier gain of as much as 1.8%.
“Unfortunately the use of biometrics and electronic channels can mean job losses,” Hattingh said, adding that the union continues to consult with FNB to try to reduce the number of job losses. “For the banking industry, the broader economic issues are real. Retrenchments aren’t good for the people or the country.”
Both Hattingh and her colleague at Sasbo, Eugene Ebersohn, who represents union members at Standard Bank Group Ltd., said they were not aware of job-cut programs at any other lenders so far this year. With FNB’s salary negotiations starting in June, the union will focus on executive pay in the wake of the job losses, Hattingh said.
All of the banks are “refocusing on digital channels,” Patrice Rassou, head of equities for Sanlam Investment Management, said. “Customer patterns are changing. FNB especially is now reshaping its bank digitally which means they need less of a physical footprint.”