07 Aug 2025
Author Cameron Shanks, Investment Analyst
Amazon CEO Andy Jassy made headlines this week with his message to employees: AI will gradually reduce its need for corporate staff.
It’s a sentiment echoing across the tech industry.
At Microsoft, a key holding in our Global Equity Income Fund, a 3% workforce reduction this year reflects a similar pivot. Software engineers are reportedly among the most affected, with AI now generating an estimated 30% of the company’s code base.
These moves mark the early stages of a broader transformation in corporate America – the ability to do more with fewer people. This will have a profound impact on the holdings within the Global Equity Income Fund, as well as on the broader stock market.
And the implications extend beyond the tech sector. Enter the banks.
Banks account for about 8.5% of the Fund – a higher weighting than the MSCI ACWI, where they represent roughly 7.9%.
Banking is a human capital business. For the largest banks, compensation (employee costs) accounts for 50-60% of total operating expenses. But the model is evolving. Big banks are investing heavily in AI, and the productivity gains are visible. Goldman Sachs’ CEO, David Solomon, illustrates this with an example from the firm's IPO advisory services:
"An S1 filing document… 10 years ago, it would take a team of 5-6 people two weeks… Today, we can have something 95% of the way there in a few minutes"
At first glance, the conclusion seems obvious: banks should benefit at the margin by doing more with fewer people.
Assume 10% headcount reduction
As at 31 December 2024
But not so fast. While AI can automate many entry- and mid-level tasks, banking remains fundamentally an advice-driven business. And advice is still a human domain.
Banks structure their organisation charts like pyramids for good reason. Junior roles form the foundation, feeding talent upward through experience and mentorship. JPMorgan, for example, talks about eliminating “no joy work” – the repetitive, manual tasks that bog down junior staff.
But herein lies the tension. Those very tasks are where young bankers traditionally learn the ropes. Strip those away too quickly, and you risk hollowing out the base of the talent pyramid, leaving firms without the next generation of skilled advisors.
David Solomon’s quote is telling. The 95% of work that AI can now handle will become commoditised – available to any firm with the right tools. The remaining 5% – the part that requires judgment, nuance, and trust – is where the real value lies. And that value still resides in people.
Banks stand to benefit meaningfully from AI integration, but the most well-managed institutions are built for the long term. Top-tier management teams understand that banking returns tend to mean-revert over time.
That perspective is central to our conviction in JPMorgan, which is a core long-term holding in our Global Equity Income Fund. We expect its AI investments to help drive steady growth in shareholder value over time.
CEO Jamie Dimon exemplifies this. JPMorgan targets a 17% return on tangible common equity (ROTCE) through the cycle, despite exceeding this target consistently since 2018. Wall Street frequently presses the bank to raise its guidance, but the target is grounded in long-term sustainability rather than recent performance.
This long-term mindset is backed by action. JPMorgan plans to invest $18 billion in technology in 2025, focusing on employee productivity and scaling operations to absorb volume growth. The results are already visible. The bank’s technology backbone has supported a tripling of trading volumes since 2019. In payments, transaction volumes have risen 50% in recent years, and AI models have helped reduce manual exceptions by more than half.
JPMorgan’s discipline on the 17% ROTCE target can be a source of frustration for some, who view it as overly conservative. Jamie Dimon is a “glass half empty” leader for sure, but this attitude is borne from an appreciation for the competition that defines the banking industry. As in any mature industry, outperformance is fleeting unless it is reinvested.
This type of investment and forward-thinking approach to AI is not yet widespread across the banking sector. That’s why JPMorgan remains one of our top picks, and we expect its AI investments position it well to compound equity value over time.
Disclaimer
For Professional Investors only and not to be distributed to or relied upon by retail clients.
This is a marketing communication. Please refer to the following legal documents of the UCITS before making any final investment decisions. For UK investors: This product is based overseas (Ireland) and is not subject to UK sustainable investment labelling and disclosure requirements. Please read the Key Investor Information, Prospectus, Supplementary Information Document and Application Form carefully. Consider getting financial advice if you need help to understand the investment and both the risks and opportunities involved. This product is authorised overseas but not in the United Kingdom and the Financial Ombudsman Service is unlikely to be able to consider complaints related to the product, its operator or depositary. Any claims for losses relating to the operator or depositary of this product are unlikely to be covered under the Financial Services Compensation Scheme. For EU investors: please refer to the Prospectus and the PRIIPs KID. The relevant documents can be found at aegonam.com. The principal risk of this product is the loss of capital.
Past performance does not predict future returns. Outcomes, including the payment of income, are not guaranteed.
Opinions and/or example trades/securities represent our understanding of markets both current and historical and are used to promote Aegon Asset Management's investment management capabilities: they are not investment recommendations, research or advice. Sources used are deemed reliable by Aegon Asset Management at the time of writing. Please note that this marketing is not prepared in accordance with legal requirements designed to promote the independence of investment research, and is not subject to any prohibition on dealing by Aegon Asset Management or its employees ahead of its publication.
All data is sourced to Aegon Asset Management (a trade name of Aegon Investment Management B.V.) unless otherwise stated. The document is accurate at the time of writing but is subject to change without notice. Data attributed to a third party (“3rd Party Data”) is proprietary to that third party and/or other suppliers (the “Data Owner”) and is used by Aegon Investment Management B.V. under license. 3rd Party Data: (i) may not be copied or distributed; and (ii) is not warranted to be accurate, complete or timely. None of the Data Owner, Aegon Investment Management B.V. or any other person connected to, or from whom Aegon Investment Management B.V. sources, 3rd Party Data is liable for any losses or liabilities arising from use of 3rd Party Data.
Aegon Asset Management Investment Company (Ireland) Plc (AAMICI) is an umbrella type open-ended investment company which is authorised and regulated by the Central Bank of Ireland. Aegon Investment Management B.V (Aegon AM NL) is the appointed management company. Aegon AM NL (Chamber of Commerce number: 27075825) is registered with and supervised by the Dutch Authority for Financial Markets (AFM). Aegon AM NL's German branch markets AAMICI in Germany, Austria and Switzerland, is registered with and supervised by the AFM and supervised by BaFin in Germany. Aegon AM NL’s branch in Spain markets AAMICI in Spain, Italy and Switzerland. Aegon AM NL's Spanish branch is registered with and supervised by the AFM and is supervised by the CNMV in Spain. For Switzerland, AAMICI is a UCITS which is authorised for distribution by FINMA as a Foreign Collective Investment Scheme. The Disclosures are available from www.aegonam.com or from the Representative and Paying Agent in Switzerland, CACEIS (SA) Switzerland, Chemin de Precossy 7-9, CH-1260 Nyon / VD, Suisse, Phone: +41 22 360 94 00, Fax: +41 22 360 94 60.
Aegon AM UK markets AAMICI in the UK and otherwise outside of the EEA. Aegon Asset Management UK plc (Aegon AM UK) is authorised and regulated by the Financial Conduct Authority.
Please note that not all sub-funds and share classes may be available in each jurisdiction. This content is marketing and does not constitute an offer or solicitation to buy any fund(s) mentioned. No promotion or offer is intended other than where the fund(s) is/are authorized for distribution.
Please visit https://www.aegonam.com/en/contact/ for an English summary of investor rights and more information on access to collective redress mechanisms.