My “banker wanker” mates won’t cherish the thought, but the days of being a well-paid  (some would say over-paid) banker are numbered. Banks will be forced to slash thousands of jobs and cut the remuneration of all except award protected tellers and junior staff, in an attempt to strip costs and get profits growing.

That’s the inescapable conclusion after a pretty disappointing set of profit results from the major banks.

Commonwealth’s Bank’s third quarter trading update on Monday brought this message home loud and clear. Third quarter cash profit fell by 28% from $2.45bn to around $1.7bn. While a fair chunk of this fall was due to “one-off” provisions to cover the cost of customer remediation following the Royal Commission, underlying profit still fell by 9% or $250m after tax. Adjusting further for the lower number of days in the quarter and some other factors, the fall was around $125m or about 4%. But it is still a 4% fall in profit.

The problem for banks is that revenue is not growing. Lending volumes are static as the housing market downturn bites, business confidence remains subdued and banks are de-risking their corporate and institutional portfolios. Interest margins are also pressured, which is not going to be helped now that we are back in an environment of lower interest rates. More than a third of bank deposits earn zero interest (cheque accounts where no interest is paid or savings accounts being paid interest at 0.01% pa), which can’t be cut if the RBA reduces the benchmark cash rate. If you are “required” to cut lending rates, but can’t cut deposit rates, your margin gets squeezed and net interest income falls.

Fee income is also being savaged. CBA’s quarterly result showed that non-interest income fell by 10% or approximately $150m. One of the chief drivers was its “better customer outcomes” programme, which is delivering fee removals, fee reductions and pre-emptive fee alerts for the benefit of customers. Examples include the removal of ATM fees, reduced IMT fees, overdrawn account alerts and credit card payment reminders by SMS, removal of ongoing service fees in Commonwealth Financial Planning. For the first nine months of FY19, it has cost CBA $180m in fee revenue. For the full year, this will increase to $275m. And for next year, the hit to non-interest income will be $415m.

Bad debts are also starting to tick a little bit higher as consumers feel the pressure. On the cost side, expenses are flat to marginally higher, with the “automatic” 3% CPI adjustment in wages being offset by trimmings to headcount and a freeze on increases in discretionary costs.

Bottom line – flat to negative interest income, negative non-interest income, increasing bad debt expense and flat operating expenses translating to lower profits.

At the analysts briefing following the announcement on Monday, CBA CEO Matt Comyn was quick to hose down an earlier media report that 10,000 jobs were slated to go. He pointed out that 400 people were involved in the Bank’s “temporary” customer remediation program and that the CBA was divesting several assets including the insurance business (CommInsure) and the funds management business (CFSGAM) which would be accompanied by the transfer of relevant staff.

However, due to the pressure on revenue and with employment costs making up about 60% of operating expenses, the only substantive way to arrest declining profits is to cut the workforce and thousands of jobs will go. In this regard, CBA will be following its peers – with ANZ probably the most progressed and the NAB implementing a program to re-engineer its processes prior to targeting a headcount reduction of 6,000 persons.

Branches and branch staff will be hit hard, as customers vote with their phones and the cashless society takes over. There will be fewer branches with smaller footprints focussed on service and sales. As processes are further digitised and products streamlined, call centres will be impacted and back office teams will shrink.

Head office support teams in marketing, human resources, planning, risk, corporate development and finance will also be under pressure. The days of having “10 bank people at a meeting” will be but a distant memory.

And it won’t just be jobs – it will also be remuneration packages. Some bank directors and CEOs have already taken pay cuts and this is starting to spread to the Executive ranks. It will eventually flow down to middle managers. The reality is that for the level of personal risk and responsibility, Australian bankers are well paid – much better that many of their white collar colleagues. Effectively “guaranteed” performance bonuses means that that there are thousands of “middle managers” and others in each bank earning very comfortable six figure salaries.

Deteriorating profits will drive the inevitable correction. With job cuts, Australian bankers are going to look a little like an endangered species. They still might be “wanker bankers”, but most won’t be “rich wanker bankers”.