European banks could cut more than 200,000 jobs over the next five years as lenders accelerate adoption of artificial intelligence and continue closing branches, according to estimates cited by the Financial Times.

In a new report, Morgan Stanley estimates the industry could reduce headcount by about 10% by 2030, as banks push more operations online and seek to capture the cost savings promised by AI. The analysis covered 35 lenders employing roughly 2.12 million staff, implying that a 10% reduction would equate to about 212,000 job cuts, according to the FT.

The most vulnerable roles are expected to be in banks’ “central services” divisions, including back- and middle-office functions, as well as positions in risk management and compliance. Morgan Stanley noted that “many banks have quoted efficiency gains coming from AI and further digitalization to the tune of 30 percent,” according to the FT.

Investor pressure is a key driver. Europe’s lenders have faced intensified demands to cut costs and lift returns on equity that have lagged behind US rivals. Morgan Stanley’s analysts said AI offers a new route to improve cost-to-income ratios at a time when previous cost-cutting efforts are losing momentum, according to the report.

Banks are already pointing to AI as a catalyst for restructuring. The FT cited ABN Amro’s plan, announced in November, to cut about a fifth of its full-time staff by 2028, and comments by Société Générale CEO Slawomir Krupa in March that “nothing is sacred” in his effort to bring down the French bank’s cost base.

UBS’s head of European banks research, Jason Napier, said the industry is already seeing change in audit, law and consulting, but that banks have not yet delivered improved efficiency because the tools are not fully implemented, according to the FT. 

Read more at the Financial Times