Morgan Stanley has issued a stark warning for employees of European banks, predicting that artificial intelligence (AI) could lead to significant job reductions. In a research note, the American bank forecast that AI could help European banks achieve productivity gains of around 30%, potentially resulting in job cuts of up to 20% over the next five years.
Analysts predict workforce reductions
The team of analysts at Morgan Stanley, led by Giulia Miotto, believes that the growing adoption of AI across banking operations could substantially reduce workforce requirements in the shorter term. According to a Bloomberg report, the note indicated that many of the expected reductions may occur through voluntary exits, including retirements. The analysts estimated that banks could reduce headcount by 10% to 20% while generating cost savings of 4% to 9%.
AI to boost revenue opportunities
In addition to reducing operational costs, Morgan Stanley analysts said AI may also help banks increase revenue opportunities. The note highlighted that AI tools could improve customer targeting by assisting lenders in determining which financial products are more suitable for specific users. The analysts added that banks with integrated retail banking, savings, insurance, and wealth management platforms are likely to benefit more from these capabilities as AI adoption expands across the sector.
European banks already exploring AI-led restructuring
Several European banks have already acknowledged that AI is likely to reshape parts of their workforce, the report adds. Standard Chartered recently announced plans to remove nearly 8,000 support roles over the next four years, linking the decision to AI adoption. CEO Bill Winters said the move would affect lower-value human capital, though he later apologized for the wording. Meanwhile, HSBC is reportedly considering cutting around 20,000 jobs, based on the expectation that AI could help streamline middle- and back-office functions. Commerzbank CEO Bettina Orlopp also stated last week that AI could contribute to cost savings worth approximately €350 million over the next few years.
