The six largest banks in the U.S. have shed 24,000 jobs in the last year. Banks have laid off 300,000 worldwide since the crisis, according to an estimate by Bloomberg.
Early layoffs made sense in the wake of the crisis, as banks exited risky businesses in droves and focused on shrinking.
The latest downsizing efforts are more an attempt to eke out higher returns on equity.
But it is hard to imagine these cuts will be able to help banks deliver the kind of high returns that shareholders once enjoyed when banks levered up.
Meanwhile banks are still a service business and they risk cutting to the bone with ad hoc payroll cuts.
Most of Citigroup's layoffs, for instance, involve operations and tech support personnel. They may not be raking in the millions that traders do, but they serve a critical function as gatekeepers for the business.
These are the employees who see that the bank's mortgage business adheres to the newly implemented servicing standards or that its brokerage keeps customer money separate from capital.
Do away with the lot of them and we will have more "robo-signing" scandals, securities violations and trading errors that will eat into all the gains made from "efficiency saves" and then some.
-- Written by Shanthi Bharatwaj in New York.