The beginning of the end of the banking profession?


By Taonga Sabola:


What is happening to our banking system? Could this be the beginning of the end of the banking profession? These are some of the questions Malawians are asking following requests for voluntary retrenchments by two Malawi Stock Exchange (MSE)-listed commercial banks, National Bank of Malawi (NBM) and NBS Bank.

It all started with NBM issuing a circular on February 25 2019 to members of staff, asking them to volunteer for the exit door.


“The above development has been necessitated by the recent changes in the operating environment that have made it necessary to reduce staff costs.

“Those interested to proceed on a voluntary retrenchment should submit their applications through management of their divisions or service centres to Human Resource Divisions not later than Friday March 8 2019,” reads the circular in part.

A few days later, NBS Bank announced the closure of five branches and asked members of staff to volunteer to be retrenched.


“As earlier communicated, the operations of the closed service centres will be merged into the closet service centres. The bank will then consider all applications made and the applicants will be notified of the outcome upon review,” reads communication from NBS Bank signed by Chief Finance Officer, Vera Zulu and Head of Human Resources, Austin Thunde.

As if that is not enough, closer to home, Standard Bank South Africa, on Thursday announced it was cutting 1,200 jobs and closing 91 branches.

Standard Bank says in a statement it is realigning its retail and business banking delivery model to the changing needs of customers amid rapid adoption of digital banking products and services.

The bank says the shift in customer behaviour means clients are using its branches less.

“As part of the implementation of the new banking delivery model, some of the roles currently being performed in our branches will change. A decision has also been taken to close 91 branches, with the vast majority of these closing by June 2019.

“These changes will impact approximately 1,200 jobs. However the actual number of employees who will ultimately exit the employ of Standard Bank SA could be lower, as new opportunities will become available in the new operating model,” Standard Bank says.

What is draining the jobs?

In recent years, the world has seen increased adoption of technology to create digital banking platforms.

The local banking community has not been spared by the supersonic speed at which firms embrace technology.

Before 2015, banks were using manual processes in their operations. However, rapid changes have been experienced in the banking sector, requiring the use of technology.

For example, processes such as owning a bank account are now possible without necessarily visiting a banking hall.

At the tap of a few keys on a mobile phone, people are able to create a bank account and start transacting.

Similarly, the coming in of deposit-taking automated teller machines has replaced many front-office banking jobs.

One just needs to go to an ATM, make a deposit and go home without interacting with anybody.

Bank of America CEO, Brian Moynihan, said in October last year that the adoption of technology at the second-biggest US lender has allowed him to cut 100,000 workers in less than a decade from a peak of about 305,000 workers to 204,000 last quarter.

Falling interest rates

For a long time, banks have survived on high interest rates that prevailed in the economy.

However, in recent years, reduced interest rates have meant thinning margins for financial institutions.

This is despite overambitious targets from shareholders who demand increased return on investment every coming year.

Looking at financial statements of various banks in recent years, one thing has remained very clear. Interest income has kept on falling and may fall even further if Reserve Bank of Malawi achieves its targeted 11 percent policy rate by 2021.

Interest rate capping scare

The coming in of the Financial Services Amendment Bill 2018, popularly known as the Interest Rate Capping Bill has left financial institutions hoping for the worst.

This is so because the banks envisage even lower margins once the legislation comes into effect.

Among others, interest rating would trigger a sharp drop in lending as banks would only lend to proven sound borrowers with strong capacity to pay back. In this case, only government and a few financially sound corporates could qualify in that category.

Although the Parliament that rose sine die last Friday did not succeed in passing the bill, chances are high that it may bounce back in the next session.

What the future holds

Former Citigroup boss, Vikram Pandit, in 2017 predicted that developments in technology could cut the number of banking jobs by 30 percent in the next five years.

Pandit argued that artificial intelligence and robotics reduce the need for staff in roles such as back-office functions.

“Everything that happens with artificial intelligence, robotics and natural language — all of that is going to make processes easier. “It’s going to change the back office,” Pandit said.

With hundreds to thousands of Malawian youths pursuing careers in banking, the future does not look very bright.

But Institute of Bankers Chief Executive Officer, Liness Nkungula, said on Monday the institute will continue training skilled workers in the banking industry.

“Banking is always changing. As such, we will continue training quality workforce for the country’s banks,” Nkungula said.


Much as banks could have their reasons to downsize their headcount, there is need for more players in the banking sector to absorb the many people who could find themselves jobless.

Again, more players could help absorb the many graduates finishing tertiary education in various banking schools.

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