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Weak Business Outlook for 2013 Could Mean More Lost Finance Jobs

The widespread job cuts that have been made in the financial services industry over the last two years could easily continue if the 2013 business outlook does not improve.

Citigroup Layoff Announcement 

Citigroup announced on December 5 that it would eliminate

The widespread job cuts that have been made in the financial services industry over the last two years could easily continue if the 2013 business outlook does not improve.

Citigroup Layoff Announcement 

Citigroup announced on December 5 that it would eliminate 11,000 positions in an effort to reduce costs and boost efficiency at the major financial services firm, amid an environment of lackluster economic growth, more stringent regulations for the financial regulations and falling market activity

Citi analyst Mike Mayo stated right after the announcement that these reductions are simply a glimpse of the positions that will be eliminated before the company's annual shareholder scheduled for April 16. Greater reductions in costs and profitability improvements are expected by many major shareholders.

"Net-net: this is a decent start by the CEO, who has only been in his job for six weeks. While clearly a portion of these moves must have already been in the works, the moves today create a tone that the new CEO will not take half measures. The real test will be what else Citigroup does prior to the annual meeting," Mayo wrote.

The mindset of Citigroup's new head refusing to use watered-down tactics could mean substantial job cuts if the business outlook does not represent a substantially better economic climate for the financial services industry.

Greater Industry Job Cuts 

If the predictions provided by various market experts are accurate, the greater financial services industry could experience the same job elimination as Citigroup unless the prospects for these firms improve markedly. Analysts and recruiters have predicted that banks worldwide are likely to eliminate more jobs unless revenue experiences a sharp increase in 2013, according to Bloomberg.

"The knives are sharpened and ready," Jason Kennedy, chief executive officer of London-based search firm Kennedy Group, told the news source. "These institutions are too big for the business they are generating but they are still quite bullish that the market will return by mid-2013. Unless the markets picks up, there will be more cuts in the first half."

In 2011, major lending institutions Bank of America Corp. and HSBC Holdings Plc. announced that they would eliminate 30,000 positions, and major financial services firm UBS AG stated that it would substantially reduce its position in fixed-income trading and fire 10,000 members of its staff. Banks across the world are coming under pressure from shareholders to reduce their costs, as the return on equity they generate falls short of their cost of capital, according to the media outlet.

Changing Industry 

"The financial-services industry has been, for a number of years now, in a time of transition," and market participants are preparing themselves for survival in a new business climate, Greg Fleming, president of Morgan Stanley' brokerage and asset-management businesses, stated on December 5 at the Bloomberg Link Hedge Funds Summit in New York. "That’s ongoing for everyone in the industry."

The adjustment that is happening in the industry has resulted in it eliminating more than 300,000 jobs since the beginning of 2011, according to data compiled by Bloomberg. Sanford C. Bernstein analysts wrote in November that generate returns that are even one-half what they made before, Wall Street companies will have to lower compensation and staff and sell off close to one-third of assets involved in their trading businesses. The wrote that "this implies that the industry is likely to shrink."

What actions is your financial services firm taking to cope with these widespread economic pressures afflicting the industry? What are your 2013 business ideas?

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