Last checked at 
By Laura Noonan and Joshua Franklin
LONDON, April 13 (Reuters) - Europe's largest banks cuttheir staff by another 3.5 percent last year and the prospect ofa return to pre-crisis employment levels seems far off, despitethe region's fledgling economic recovery.
Spurred into action by falling revenue, mounting losses andthe need to convince regulators they are no longer "too big tofail", banks across the globe have shrunk radically since the2008 collapse of U.S. bank Lehman Brothers sparked the financialcrisis.
Last year, the tide of bad news began to turn for Europeanbanks, which are among the region's largest employers.
Helped by recovering economies and receding fears for theeuro zone's future, the benchmark Stoxx Europe 600 Banks index rose 19 percent, outpacing the 17.4 percent increase inmulti-sector stocks.
But despite the improved outlook, Europe's 30 largest banksby market value cut staff by 80,000 in 2013, calculations byReuters based on their year-end statements showed.
Recruitment consultants warn workers' hopes for a turnaroundthis year could be misplaced, bad news for countries like Spainwhere tens of thousands of bank layoffs have helped driveunemployment to 26 percent.
However, while painful for the people who have lost theirjobs, the reduction of large banks' workforces through acombination of asset sales and redundancies means banks won'thave as big an impact on overall employment in future crises.
Antoine Morgaut, chief executive for Europe and SouthAmerica at recruiter Robert Walters does not expect theindustry's employment to ever return to what it was in itsheyday of 2008. Then, the 25 of the top 30 banks with comparablefigures employed about 252,000 more than the 1.7 million they dotoday. "It's been a bubble for 20 years," said Morgaut.
"In speciality areas we are seeing a bit of an upside but itis quite marginal and it will stay like that for the next six tonine months," he added.
BIG-TICKET RESTRUCTURING
The most dramatic of last year's job cuts came from majorrestructurings, such as Spain's Bankia which shed 23percent of its workforce to help meet the conditions of its 41billion euro ($56.9 billion) European rescue.
Italy's Unicredit, which reduced the highestnumber of staff, 8,490, said in its annual report that some ofthe reductions were the result of a project to outsource ITfunctions to joint ventures.
Belgium's KBC cited asset sales as a major reasonfor its 7,938 reduction in headcount, 22 percent of itsworkforce. The bailed-out bank sold Russian offshoot AbsolutBank and Serbian business KBC Banka. Staff figures for AbsolutBank were not available, while KBC Banka's most recent figuresshow 501 staff at the end of 2012.
Spain's BBVA also cited asset sales as the driverof its 6,547 reduction in staff, or 23 percent of headcount,which came in a year when the bank sold operations in LatinAmerica.
At Bank of Ireland, where a 6.3 percent fall inheadcount was the fifth-largest in the region, a redundancyprogramme was the main reason.
The pace of staff reductions approximately halved last yearand most banks are now coming to the end of disposals andcutbacks agreed during the crisis.
However, upcoming European Union-wide tests on whether banksneed to hold bigger capital cushions could trigger another waveof asset sales and cuts.
Routine streamlining continued last year. HSBC thebiggest employer in the pack, cut headcount by 6,525, or 2.5percent of its global total. The bank came through the crisiswithout a bailout, but has slimmed down over the last threeyears by closing or selling dozens of businesses.
Only three of the banks - Barclays, Handelsbanken and Deutsche Bank - added jobs last year,and those totalled less than 770.
POCKETS OF GROWTH
Banks are hiring in a few areas, however, with somerecruiters citing rises in specialist compliance roles such asanti-money laundering, cyber security and internal audit aslenders have to deal with increasing demands from regulatorsdetermined to avoid a repeat of the crisis.
"The regulatory pressure is a cost drag on the banks but ifa role is required by the regulators, then all senior managementcan get out of the way, and you can pull the trigger and hirethat person," said Hugo Gordon Lennox, a managing director atWebber Fox, a UK quantitative and risk management recruitmentspecialist.
Others said banks were beginning to address problems createdby previous cutbacks, particularly amongst the sparse ranks ofmore junior employees.
"As business picks up, firms often find themselves withquite specific and definable skills gaps in certain areas andbanks have definitely started to try to address that," saidDavid Leithead, managing director for banking and financialservices at recruitment firm Michael Page.
Even so, big jumps in the numbers employed by banks couldtake a while to come. "It's the whole oil tanker analogy - it'sslow to stop and slower to speed up," said Miles Stribbling,director of strategic partnerships and head of PhaidonConsulting Services UK at recruiter Phaidon International. ($1 = 0.7201 Euros) (Editing by Erica Billingham)
