THE axe has started falling in corporate Singapore with DBS Group Holdings announcing sharp job cuts yesterday that will see 900 workers - or 6 per cent of its staff - gone by Christmas.

Slightly over half will be from Singapore, the bank said.

The shock news came on a day when DBS reported its steepest profit fall in two years and amid controversy over investments it sold which are now worthless.

There are also growing fears that the cuts are just the first in what could be a stream of job losses as blue chip firms and small operations scale back in the face of the economic slowdown.

The bank announced the cuts at a town hall meeting of more than 1,000 employees at Suntec City and via video link to about 500 workers from other units, including Hong Kong, Indonesia and China.

It said the layoffs are part of plans to streamline and restructure the giant banking group, which, like many around the world, is battling the effects of a financial sector crisis.

Most of the affected DBS employees will be from the Singapore and Hong Kong units with all divisions and all levels of seniority affected. DBS employs about 7,600 staff here and 4,200 in Hong Kong.

DBS sources said the IT department, backroom operations and frontline service staff are likely to feel the most pain from the cuts.

Recruiters like Mr Gary Lai, front office banking manager of search firm Robert Walters, think the consumer banking division could also take a hit since DBS 'has been aggressively expanding over the last few years' on that front.

The staff cuts are the largest since 2001, when DBS slashed 700 jobs or 5 per cent of its total staff. About 200 Singapore employees were let go then.

DBS chief executive Richard Stanley told a briefing yesterday that the staff earmarked to go have yet to be told.

'This is a painful decision for DBS, and for me personally, but something we've had to bite the bullet and do in a difficult environment,' said Mr Stanley, who took over the helm in May.

The move to restructure and streamline the group may not be 'popular', but needs to be done in order to be more productive and efficient, he said.

'To be a more streamlined organisation, we must run a tighter ship.'

He also said the layoffs were not a reflection of the bank's financial position.

'DBS remains strong and sound,' he said, adding that the extent of cost savings will only be reported in the next quarter.

Details of the compensation package were not revealed but it is expected to be in line with the market standard of a month's salary for each year of service.

Mr Stanley would not say if the cuts will also affect employees at POSB.

Some DBS employees told The Straits Times that they were 'quite prepared' for the layoffs as foreign banks such as Merrill Lynch, Standard Chartered and UBS had already been cutting jobs here.

But others had thought that Mr Stanley, a genial banker often described as a 'people person', would not resort to job cuts in a bid to increase efficiency.

Ms Nora Kang, president of the DBS Staff Union, said that the union will 'walk through this journey with all affected members' to ensure a smooth transition.

She added that the union had approached the NTUC's training institute to develop suitable training programmes for members.

Mr Stanley stressed yesterday that the 'restructuring exercise' was not related to the alleged mis-selling of products linked to now-bankrupt US investment bank Lehman Brothers.

CIMB-GK economist Song Seng Wun said the DBS layoffs are only the beginning and that the real economy will be hit with unemployment across all sectors - from hospitality-related services to manufacturing - and not just finance.

'If you talk about a global slowdown, the demand for all goods and services will drop, and it's going to hit all jobs hard,' Mr Song said.

Still, Singapore's deputy labour chief Heng Chee How maintained yesterday that retrenchments would remain relatively low this year at about 10,000 jobs.

'That is because this recession has just started towards the end of the year, so we think that the unemployment and retrenchment numbers will go up next year,' he told Channel News Asia.

He added that some companies are also going for reduced hours to cut costs and that it is now even more crucial to ramp up retraining.

gabrielc@sph.com.sg

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