(Bloomberg) -- Total headcount at China's four largest banks fell in 2016 for the first time in six years, as the lenders cut costs and tried to adapt their massive branch networks in the face of competition from online payment giants Ant Financial and Tencent Holdings Ltd.
Industrial & Commercial Bank of China Ltd, China Construction Bank Corp., Agricultural Bank of China Ltd and Bank of China Ltd. employed 17,824 fewer people at the end of 2016, the first such drop since at least 2011, an analysis of their earnings filings last week showed. The drop reflected in part the way the nation's banks are trying to trim the estimated 3 million people who work in their branch networks.
"The banks no longer need so many employees working at branches because customers are no longer using that many banknotes for transactions and Internet banking is so developed now," Li Bin, a Shanghai-based analyst at Capital Securities Corp., said by phone Wednesday. "People are expecting different services from banks nowadays."
Even so, the banks are struggling to keep pace with the rapid changes in China's financial system, as Tencent and Zhejiang Ant Small & Micro Financial Services Group, an affiliate of Alibaba Group Holding Ltd., have eaten into their traditional businesses by providing more user-friendly payment services on mobile phones. More than 84 percent of banking transactions in China were completed outside brick-and-mortar branches in 2016, compared with about 63 percent in 2013, according to the China Banking Association.
About 3.8 million people work for China's banks, according to the banking regulator. Some 80 percent of them are bank tellers in the branches, according to an estimate in an April 1 report by Zhou Kunping and Li Ying, Shanghai-based analysts at Bank of Communications Co.
The army of tellers contrasts with the staff deployment at overseas banks, where about 60 to 80 percent of employees work in marketing and sales, the Bocom analysts said. Most Chinese banks deploy only 20 to 30 percent of their staff in those functions, they added.
ICBC, the world's largest lender with more than 16,000 outlets, reduced its number of branch tellers by 14,090 last year, the banking association said. The figures reflect staff reductions as well as redeployment of workers to other functions. Teller numbers fell by 30,007 at Construction Bank and 10,842 at Agricultural Bank, the association said. Continued redeployment will help Chinese banks reduce the number of their tellers by another 20 percent over the coming decade, the Bocom analyst report said.
ICBC plans to control the total number of its physical outlets and switch to more ATMs, online banking and services that rely on artificial intelligence, the Beijing-based said in its annual report.
Chinese banks are also reducing staff at a time of pressure on their earnings. The four largest Chinese banks narrowly avoided their first decline in combined annual profit since 2004, thanks to cost reductions and the lower-than-expected charges for bad loans. Their total net income of 858.2 billion yuan ($125 billion) for 2016 was 0.2 percent higher than the previous year, data compiled by Bloomberg show.
China's big four banks employed a total of 1.63 million people at the end of 2016, according to their earnings filings.
Even after the reductions last year, Chinese lenders take four of the top five slots for employment by listed banks around the world, ahead of the likes of Wells Fargo & Co., JPMorgan Chase & Co. and HSBC Holdings Plc, data compiled by Bloomberg show. Russia's Sberbank PJSC ranks No. 4 in the top five.
To contact Bloomberg News staff for this story: Jun Luo in Shanghai at jluo6@bloomberg.net, Alfred Liu in Hong Kong at aliu226@bloomberg.net.
To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Andy Sharp
With assistance from Jun Luo, Alfred Liu
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