Last checked at 
* Total workforce of 25 leading banks down 1.2 pct
* Investment banking, back-office jobs targeted
* Hiring upturn unlikely any time soon -recruiters
* Graphic: http://graphics.thomsonreuters.com/14/europeanbankstaff/index.html
By Clare Hutchison
LONDON, Sept 16 (Reuters) - The banking sector's long andpainful restructuring accounted for a further 1.2 percent fallin staff numbers at Europe's biggest lenders in the first halfof the year, data compiled by Reuters shows, with littleprospect of an upturn any time soon.
Forced to hold more capital against risky assets since theimposition of new regulations after the financial crisis,Europe's top lenders have been shrinking steadily to counter theresulting loss of profitability in some areas of their business while a crackdown on proprietary trading has cut off a valuablesource of supplementary revenue.
Of the 25 of Europe's 30 largest listed banks that discloseemployee numbers for the six months to the end of June,including Barclays, Deutsche Bank and UBS, headcount fell at 16. Though nine of the banks addedstaff, total jobs across the group fell by 21,135.
About half of the drop is attributable to Dutch lender ING no longer including Indian offshoot ING Vysya Bank inits headcount figures, but it remains clear that banks arebecoming less significant employers.
The trend is even more pronounced in the United States,where the four biggest banks by assets - JPMorgan, Bankof America, Citi and Wells Fargo - cut23,300 jobs in the first half of the year. That takes the totalfor the past 12 months to more than 52,000 - about 5 percent oftheir combined workforce.
The pace of decline in Europe was slightly slower than in2013 when the 25 banks together cut about 63,000 jobs over thefull year, but financial services recruiters say that moreswingeing cuts cannot be ruled out.
"Banks in 2014 do not hesitate to shut down businesses thatare loss-making ... there's (no longer) any shame in that," saidJason Kennedy, chief executive of Kennedy Group, a recruitmentfirm specialising in investment banking and hedge funds.
"New-age banks have fewer people, less product and are lessprofitable."
Calculations by Reuters show that while European banksimproved their balance sheets by 530 million euros ($685million) in the first half, profitability remained well belowtargets.
VICIOUS CIRCLE
Royal Bank of Scotland, which was bailed out by theBritish government in 2008, made some of the deepest cuts. Itsworkforce shrank by 5,000 as it reduced the number ofcontractors it employs, streamlined operations and sold theChicago-based division of its U.S. bank Citizens.
Recruiters said that most job cuts have come in investmentbanking, which has been hit hard by the tougher capital rulesand low interest rates.
British lender Barclays has axed 2,700 jobs at itsinvestment bank this year as part of a wider cull of 19,000roles over three years.
Back-office roles also remain at risk, while greater use ofmobile banking poses a threat to branch staff. Deutsche Bankanalysts have forecast that Britain will need only 500 bankbranches in 10 years' time. Britain's six largest bankscurrently have nearly 8,000 branches.
Recruitment specialist Kennedy says that job losses could beexacerbated by a recent focus on cuts at managing directorlevel. He says that such moves limit promotion prospects and,combined with an EU bonus cap, sap motivation and productivity,making further cuts more likely.
"(Bankers) think, 'I'm not going to get paid any more if Iwork 20 hours (a day) ... why should I go crazy?' Revenues arecoming down because of that and it's a vicious circle," he said.
Even if the economic outlook picks up, banks are unlikely togo on any hiring sprees as they adust to the new shape of theirorganisations and keep a wary eye on market volatility caused bywider geopolitical concerns, such as the situation in Ukraine.
"I would like to think by the early part of next year we'reprobably going to start to see some forward momentum, however...it's still a little bit of a crystal ball way of seeing things,"said Miles Stribbling, a director at recruitment firm PhaidonInternational.
Those that bucked the trend by hiring staff were likely tohave done so to beef up regulatory compliance functions,Stribbling said.
Nordea, the Nordic region's biggest lender,strengthened its IT services with almost 300 extra staff andSweden's Swedbank boosted headcount by 417 to expandadvisory services for bond issues and corporate finance.($1 = 0.7738 Euros) (Additional reporting by Laura Noonan, Olivia Hardy and SteveSlater; Editing by David Goodman)
