European banks may reduce their workforce by up to 20% over the next five years as companies increasingly adopt artificial intelligence, according to a report by Morgan Stanley analysts.
The report stated that AI could improve productivity by nearly 30%, allowing banks to operate with fewer employees. However, analysts expect many of the job cuts to happen through voluntary exits such as retirements rather than sudden layoffs, Bloomberg reported, citing the report.
Several banking executives have already admitted that new technology will change the way banks work and could replace some roles across departments. Standard Chartered has said that it plans to cut nearly 8,000 support roles over the next four years. The lender linked the move to the growing use of artificial intelligence.
HSBC Holdings is also reportedly considering cutting around 20,000 jobs, hoping to reduce the need for staff in middle and back-office functions, the Bloomberg report stated.
Commerzbank AG CEO Bettina Orlopp said AI could help generate about €350 million in cost savings in the coming years. Analysts estimate these reductions could save banks around 4% to 9% in total costs.
Banks are looking to utilise AI to boost revenue by optimising their services. Key focus may be on aspects such as identifying what products to offer to which customers. Banks with integrated retail, savings, insurance and wealth platforms are better suited to benefit from that trend, they said.
Layoffs linked to artificial intelligence have stoked serious anxiety as people fear the future of employment. Some leading AI figures are now softening their earlier warnings about mass unemployment due to AI. Nvidia CEO Jensen Huang and OpenAI CEO Sam Altman, who previously highlighted major disruption risks, now say that those predictions were exaggerated or misunderstood.
Last week, speaking at the Commonwealth Bank of Australia's Accelerate AI Conference in Sydney, Altman said that the rapid AI development would not lead to the “jobs apocalypse” that some companies talk about. “I thought there would have been more impact on entry-level white-collar jobs being eliminated by now than has actually happened,” he told the conference on Tuesday, as reported by The Australian.
Also Read: Tech Layoffs 2026: 25,000 Jobs Lost In May As Companies Slash Workforce — Full List
Similarly, Nvidia CEO slammed top business leaders for promoting the narrative that connects AI to job loss. “How is it possible that AI became productive and useful only six months ago, and they were somehow laying people off two years ago because of AI?...It was just a way for them to sound smart, and I really hate that. I think we're scaring people and that's irresponsible,” he told Channel News Asia this week.
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