Barclays Bank To Sack 200 Managers. Others Banks To Follow.

Barclays Bank To Sack 200 Managers. Others Banks To Follow.
As Reported by The Business Daily.

Barclays Bank of Kenya is laying off 200 managers to cut costs as lenders increasingly look at trimming their executive suites this year to control their rising wage bill.

Managing director Adan Mohamed sent a memo to all staff on Tuesday saying the workforce would be cut by six per cent in line with an ongoing restructuring plan.

Other top banks including Equity and Co-operative have announce a freeze in hiring plans and job cuts while KCB has hired global consultancy firm McKinsey & Company to help create a new organisation structure especially on its executive suites.

CFC Stanbic Bank is also believed to be planning a cut on its workforce from March, according to sources.

The employment redundancies are informed by the efficiency gains that Kenyan banks have made after installing new IT platforms in the past two years and merging some departments.
“Approximately 200 management level colleagues will be affected—slightly over six per cent of our work force. Union members are out of scope,” Mr Mohamed said in the January 18 memo.

“This is not an early retirement scheme but rather a process that affects employees whose roles are likely to change as a result of realignment to improve productivity,” added Mr Mohamed, without giving details on the planned changes.

Sources at the bank say it’s planning to merge some departments to improve efficiency and cut back on its rising wage bill, which is the highest in the industry, driven mainly by the bank’s high number of managers compared to its peers.

Its wage bill stood at Sh7.2 billion in 2009 December up from Sh3 billion in 2006 with its staff count having doubled over the period to 3, 590 workers.

The huge wage bill has partly helped squeeze its margins as it grew its net profits for the nine months to September by six per cent to Sh5.4 billion at a time when its rivals such as KCB, Equity Bank and Standard Chartered bank are announcing double-digit growth in profits.

The payroll cut is emerging at a time when the banking sector has in the last three years strengthened its executive suite as talent emerged as a weapon for market share growth.

In 2009, for instance, the sector grew the number of managers on its payroll by 6.4 per cent to 6, 156 or 23. 5 per cent of its total workers even as it cut on the number of supervisors, clerical and support staff, according to Central Bank of Kenya (CBK) data.

“Banks focused on managerial staff to in 2009 to drive growth momentum,” said CBK in its latest supervision report on the banking sector.

But the industry’s heavy investment on IT in the last two years—whose benefits begun to show from the second half of 2010—has reduced the need for paper work and backroom offices due the automation of branches, which has rendered a number of workers redundant.

The focus on reducing the number of managers in the sector will mark a significant shift in Kenya’s banking industry, which has tended to focus on the low cadre employees while retrenching.

Barclays Bank appears to have been hit hard by the redundancies since it pays its staff better than its peers and it has also the highest count of managers in the industry.

This is captured by the variance of its wage bill compared to that of Equity bank despite having almost an equal number of employees.

Equity bank had 5, 007 employees in 2009 almost similar to that of Barclays Bank’s 5, 325, but it’s wage bill of Sh4.3 billion compared to Barclays’ Sh7.2 billion.

“Barclays Bank has been paying relatively higher salaries and this has weighed down on the its earnings,” said Renaldo D’Souza, analyst at Genghis Capital.

“The bank has struggled to grow its earnings and is now turning to consolidation— cost-cutting, selling off its custodial business and adopting alternative delivery channels like mobile-based banking.”

McKinsey & Company is expected to the focus on job roles and placement, governance structures and KCB’s IT platform.

“We are likely to see a lean executive team with very clear roles that same brief McKinsey gave Kenya Airways and KenGen,” said a financial analyst who requested anonymity because he has a working relationship with KCB.

In 2009, KCB had 15 executives including the CEO and his deputy with directorship titles as opposed to Barclays bank that has half the number.

KCB’s wage bill increased from Sh3.8 billion in 2005 to Sh7.1 billion in 2009.

Commercial banks accelerated their employee salaries between 2006 and 2008 as they battled for talent they needed to support expansion initiatives, doubling their wage bill from Sh19.2 billion in 2006 to Sh38.2 billion in 2009, with top five accounting for 63 per cent of the industry’s wage bill.