Popularity of digital players leads to branch trimming, job cuts

BEIJING - For the first time in six years, China's four largest banks saw their collective headcount drop in 2016. Lenders also cut costs.

Industrial & Commercial Bank of China Ltd, China Construction Bank Corp, Agricultural Bank of China Ltd and Bank of China Ltd cut as many as 17,824 jobs in 2016, the first such drop since at least 2011, an analysis of their earnings filings last week showed.

Trimming of their massive branch networks came in the face of competition from online payment giants Ant Financial and Tencent Holdings Ltd.

The drop in headcount reflected in part the way the nation's banks are trying to trim the estimated 3 million people who work in their branch networks.

"The banks no longer need so many employees working at branches because customers are no longer using that many banknotes for transactions and internet banking is so developed now," Li Bin, a Shanghai-based analyst at Capital Securities Corp, said. "People are expecting different services from banks nowadays."

Even so, the banks are struggling to keep pace with the rapid changes in China's financial system, as Tencent and Zhejiang Ant Small and Micro Financial Services Group, an affiliate of Alibaba Group Holding Ltd, have eaten into their traditional businesses by providing more user-friendly payment services on mobile phones.

More than 84 percent of banking transactions in China were completed outside brick-and-mortar branches in 2016, compared with about 63 percent in 2013, according to the China Banking Association.

A source at Agricultural Bank of China attributed the headcount drop to banks' increasing attention to improvement of network construction and online services.

"With the wave of information technology revolution, banks are undertaking reforms to enhance efficiency and offer better user experiences," said the source who sought anonymity.

The source predicted banks' headcount will continue to decrease.

About 3.8 million people work for China's banks, according to the banking regulator. Some 80 percent of them are branch-level tellers, according to a report of Bank of Communications Co on April 1.

That is in contrast to the staffing pattern at overseas banks where about 60 to 80 percent of employees work in marketing and sales. Most Chinese banks deploy only 20 to 30 percent of their staff in those functions, the BOCOM report said.

ICBC, the world's largest lender with more than 16,000 branches, downsized its teller staff by 14,090 last year, the banking association said. Similarly, teller numbers fell by 30,007 at China Construction Bank and 10,842 at Agricultural Bank. The figures include both layoffs and redeployments.

Continued redeployment will help Chinese banks to reduce the number of tellers by another 20 percent over the coming decade, the BOCOM report said.

Chinese banks are also reducing staff amid pressure on their earnings. Last year, the four largest Chinese banks narrowly avoided their first decline in combined annual profit since 2004, thanks to cost cuts and lower-than-expected charges for bad loans.

Their total net income of 858.2 billion yuan ($125 billion) for 2016 was just a tad up year-on-year, data compiled by Bloomberg show.

Bloomberg-China Daily

Customers use facilities at an outlet of Industrial & Commercial Bank of China Ltd in Beijing. Li He / For China Daily