Many bank executives have acknowledged that AI will upend some jobs as firms start implementing the technology across different functions

The rapid spread of artificial intelligence may enable European banks to reduce their headcount by as much as a fifth over the “shorter term,” according to Morgan Stanley analysts. 

AI will result in estimated productivity gains of 30 per cent , the analysts including Giulia Miotto said in a research note on Thursday. The development is likely to result in job cuts between 10 per cent and 20 per cent over the next five years, they said, adding that much of the decrease will be achieved through voluntary departures including retirements. 

Many bank executives have acknowledged that AI will upend some jobs as firms start implementing the technology across different functions. 

Standard Chartered Plc recently disclosed it would eliminate close to 8,000 support roles over the next four years and linked that to AI. Chief Executive Officer Bill Winters said the plan would affect “lower-value human capital,” though he later apologized for his choice of words. 

HSBC Holdings Plc is looking into cutting around 20,000 jobs based on an assumption that AI will help it downsize its middle and back offices, Bloomberg reported earlier this year. 

Commerzbank AG CEO Bettina Orlopp said last week that AI will lead to cost savings worth about €350 million ($407 million) in a few years. 

The headcount reductions projected by Morgan Stanley would yield cost savings worth about 4 per cent to 9 per cent of the total, the analysts said in the note.  

The analysts also said that AI offers potential to boost revenue, for example by helping banks identify what products to offer to which customers. Banks with integrated retail, savings, insurance and wealth platforms are better suited to benefit from that trend, they said.