Major U.S. banks released fourth-quarter earnings over the past month showcasing that they looked to reduce costs – but not necessarily on tech spend as digital banking usership increased. 

JPMorgan saw its tech, communication and equipment expense spend jump 7% year over year to $2.4 billion. The New York-based bank’s headcount increased 6% YoY to 309,926 in the fourth quarter, according to the bank’s earnings report.

Citi, Wells Fargo and Bank of America each saw headcount fall while tech spending grew.  

Citi aims to slash 20,000 employees, or nearly 10% of its workforce, through 2026 as part of its restructuring plans, Chief Financial Officer Mark Mason said during the bank’s earnings call.  

Headcount and expense reduction “will allow us to right-size the firm and businesses to improve performance and return,” Mason said. The reduction in workforce will help Citi save $2 billion through 2026, he said. 

Bank of America said investments in tech and AI will add efficiencies and ultimately help them reduce turnover while reducing the need to hire more employees.  

“We can always hire a little less if we see the efficiencies coming through [tech] and redeploy the people we have,” Chief Executive Brian Moynihan said during the bank’s earnings call. 

The $2.4 billion bank’s headcount was down 1.7% YoY to 212,985, while its non-interest expenses (including technology) were up 14% YoY to $17.7 billion, according to the bank’s earnings statement. 

Rising tech investment

Many FIs are increasing their investments in technology and AI to drive efficiency and rein in costs. 

Citizens Bank reported that its equipment and software expenses increased 26% YoY to $215 million in Q4 and it aims to deliver on its “digital, data analytics and AI road map” to improve customer experience in 2024, Chief Executive Bruce Van Saun said during the $222 billion bank’s earnings call. 

 Fifth Third Bank reported a 5% YoY increase in tech and communication spend in Q4 to $117 million.  

KeyBank also increased its non-interest expense to $1.4 million, up 19% YoY, which includes equipment expense, according to the bank’s earnings statement. 

Increasing digital and mobile banking adoption

As tech spend rose, banks also reported an increase in digital banking usership. JPMorgan Chase’s active mobile customers increased 8% YoY to 53.9 million users while Wells Fargo’s active mobile usership grew 6% YoY to 29.9 million. 

Technology updates are “happening throughout the company, both at the app level and otherwise,” JPMorgan Chief Financial Officer Jeremy Barnum said during the bank’s earnings call. 

Huntington Bank’s active mobile usership reached 2.75 million, up 7% YoY, while Bank of America also reported an increase in its active digital usership of 5% YoY to 46 million, according to the bank’s earnings statements. 

Shrinking headcount

With tech and digital adoption climbing, headcount dropped.  

Citizens Bank reported that it reduced its headcount in Q4 by about 650, or approximately 3.5%, which will help the bank in limiting its “underlying expense growth in 2024 to roughly 1% to 1.5%,” Van Saun said. 

Fifth Third Bank reported a 3% YoY decrease in headcount to 18,724, while Truist Financial reported a 5% YoY drop in its headcount to 50,905. 

PNC also reported a shrinking workforce with headcount falling by 8.3% YoY to 56,411 in Q4.  

The headcount reduction will lead to $325 million in savings for the $558 billion bank in 2024, Chief Financial Officer Robert Reilly said during the earnings call. 

However, JPMorgan stood out as an anomaly with a 6% YoY increase in headcount to 309,926.

Efficiency ratio

As headcount fell, tech, automation and AI investment increased along with some banks’ efficiency ratios. A rising efficiency ratio reflects poorly on the bank’s performance. 

The Federal Financial Institutions Examination Council’s website calculates efficiency ratio by the bank’s spend as a percentage of how much revenue was brought in. 

Wells Fargo was one of the few banks that reported a drop in its efficiency ratio from 81 in Q4 2022 to 77 in Q4 2023. 

“We started our focus on efficiency initiatives three years ago and we’ve successfully delivered on our commitment of approximately $10 billion of gross expense saves,” Chief Financial Officer Mike Santomassimo said during the bank’s earnings call on Jan. 12. “Through our efficiency initiatives we have reduced headcount every quarter since third quarter of 2020 and headcount is down 16% since the end of 2020.” 

In Q4, Truist reported an efficiency ratio of 58.8, up 4.6 percentage points YoY, while KeyBank reported an efficiency ratio of 88.6, up 26.3 percentage points YoY. 

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