In a stark warning for the financial sector, analysts at global investment bank Morgan Stanley have predicted that more than 200,000 jobs in European banking could be lost over the next four years. This massive workforce reduction is being driven by lenders rapidly adopting artificial intelligence (AI) and accelerating branch closures in a bid to boost efficiency and cut costs.
The Scale of the AI-Driven Job Cuts
The analysis, which covered approximately 35 major European lenders employing around 2.12 million people, estimates that the industry could slash 10% of its total workforce by 2030. This translates to a loss of more than 200,000 positions. The report, highlighted by the Financial Times, states these cuts will be a direct result of efficiency gains from digitalisation and AI integration.
Morgan Stanley analysts pinpoint that the job losses will be heavily concentrated in central services divisions. These include roles in:
- Back office operations
- Middle office functions
- Risk management
- Compliance
"Many banks have quoted efficiency gains coming from AI and further digitalisation to the tune of 30 per cent," Morgan Stanley noted, underscoring the powerful impact of the technology.
Restructuring Pressure and Early Movers
European banks are under intense pressure from investors to reduce expenses and improve their return on equity, which continues to lag behind their American competitors. In response, AI is already being cited as a key driver for corporate restructuring.
Several major institutions have taken decisive steps. Dutch lender ABN Amro announced plans in November to cut about a fifth of its staff by 2028. Similarly, Société Générale's CEO Slawomir Krupa warned earlier this year that "nothing is sacred" in his campaign to reduce costs.
The shift promises to significantly improve banks' cost-to-income ratios, a crucial measure of efficiency. This digital transformation is expected to reshape Europe's banking landscape, particularly in countries like France and Germany, where these ratios remain high.
Some banks are already experimenting with innovative AI applications. For instance, UBS has turned its analysts into AI avatars to deliver video briefings to clients. Jason Napier, head of European banks research at UBS, advised skeptics: "Those who still need convincing that AI will significantly change financial services should spend more time exploring the tools which are already available."
A Note of Caution Amid the AI Rush
Despite the rapid adoption, some senior bankers are urging a measured approach. Conor Hillery, JPMorgan Chase’s co‑chief executive for Europe, the Middle East, and Africa, has warned against rushing into AI at the expense of foundational training.
"The one thing we have to be very careful about — in this rush and excitement about AI in our world of banking — is that people don’t lose an understanding of the basics and fundamentals," Hillery stated. He explained that JPMorgan is striving to balance AI integration with ensuring junior staff are properly trained in core tasks like building cash flow models. "Otherwise, we’re storing up a big problem for the future," he cautioned.
The Morgan Stanley forecast presents a clear picture: the European banking sector is on the cusp of a major technological upheaval. While AI promises greater efficiency and profitability for institutions, it also poses a significant threat to traditional employment, setting the stage for a profound transformation of the industry's workforce by the end of the decade.
