Barclays set to slash jobs as investment bank shrinks

 
Barclays bank Barclays is expected to announce further job cuts on Thursday

The City on Thursday will be dominated by one question - how is Barclays going to cut costs in large parts of its struggling investment bank?

Well, it seems the answer is two-fold. First, cut jobs. Second, scrap large parts of the underperforming fixed income business - that's the part of the investment bank that rode the wave of debt corporates issued following the financial crisis and the collapse in equity prices.

In its strategy announcement, the market expects Barclays to say that the job cuts could be as high as 15,000 and certainly significantly above the 10,000 to 12,000 the bank has already announced it wants to cut this year.

A large proportion will be in the UK, as high as 70% of the roles.

Although the job losses will be mostly in the investment bank, Barclays' retail operation (that's its high street branches) will not be immune.

Ultimately, Mr Jenkins would like to see the global workforce of the bank fall over the next six years from 140,000 to 100,000.

This will help Barclays bring down its cost-to-income ratio, which is at present north of 60%, closer to 50%.

Branches pruned

Technological change (mobile banking for example) and the fact that far fewer people now use Barclays' branch network means that Mr Jenkins wants to cut there as well.

There are 1,600 branches now. Expect that figure to fall by 400 over the next few years, although I don't believe an announcement is imminent.

Cuts at the investment bank will be the main story on Thursday.

As I wrote on Tuesday when Barclays announced its first quarter results, it was not long ago when fixed income banking (selling debt products that pay a fixed amount over time) was all the rage.

Gorging over

Banks gorged themselves on the huge amounts of money (and profits) available as the bond market took off and mergers and acquisitions activity declined.

Well, that time has ended - and as the bond market slows banks like Barclays are feeling the pain.

Investment bank income was down 28% in the last quarter, in large part down to a 41% fall in fixed income.

The amount of capital - easily accessible funds - the bank needs to retain to support investment banking activity has also risen under the orders of the Bank of England.

The Bank of England has also demanded changes in the way fixed income is treated on the balance sheet, the so-called risk weighting, which has again increased costs.

Boosting returns

Bits of the investment bank that will be promoted include advisory work on the growing number of deals being done as economic confidence returns and equities which are looking more robust.

Although Mr Jenkins will be pleased that costs across the bank are falling (operating expenses decreased by £861m), he will be worried that return on equity in the investment bank is still below 7%.

Analysts estimate the "hurdle rate" (a satisfactory return given the activity) should be 11%.

Barclays is refusing to comment on Thursday's announcement.

But a well-placed source told me that the volatility in the fixed income market meant that a slow withdrawal was the best option.

Although there is speculation that Barclays may put its European continental businesses up for sale, I am told that they are not yet ready for the market and that any sale would be a "medium term" option.

Mr Jenkins needs to convince shareholders that he is as comfortable running an investment bank as he is a retail bank (which is where his expertise lies).

Thursday's strategy review will be his chance to show that he does.

 
Kamal Ahmed Article written by Kamal Ahmed Kamal Ahmed Business editor

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  • rate this
    +7

    Comment number 41.

    zero hour contracts are coming to us all and only the working man can stop it its all about greed and power now god help us all

  • rate this
    +1

    Comment number 40.

    36. Poddy100

    Simple way to stop all of this is to STOP banking with them

    That will not stop anything. It will just mean that LibLabCon will give them more tax money.

    The bankster always wins. Always.

  • rate this
    0

    Comment number 39.

    How many people on huge salraries and bonuses does it take to run a bank. Whilst they need people at the top who know what they are doing the object of the exercise is surely to provide a professional service to the customer and this can only be achieved if there are enough frontline staff.

    The banking industry has become a who you know rather than what you know and needs to be reformed.

  • rate this
    0

    Comment number 38.

    Why would they spend any money on traditional banking ?? all their profits / losses come from the investment arm , takes us back to good old cable who wanted the banks split into two but has gone strangely silent since being in coalition power, needless to say they have got at him with a reward / bribe scheme.

  • rate this
    +3

    Comment number 37.

    Cutting staff will nearly always lead to a poorer service.

    My boss has cut staff by 40% but we're still expected to cope with the same level of work and without an inflation pay rise. Rich bosses live in cloud cuckoo land.

  • rate this
    +1

    Comment number 36.

    Simple way to stop all of this is to STOP banking with them.

    Vote with your feet.

    A lot of people would rather moan than actually take the steps required to punish these banks.

  • rate this
    +1

    Comment number 35.

    @8 PeterSym. How strange that you joined LLoyds who merged with TSB then you ended up with TSB after the split. I started with TSB and ended up with LLoyds after the split. I am equally cheesed off with them over their management. So we both swapped sides and both of us are worse off.

  • rate this
    0

    Comment number 34.

    1.ExpatKS
    But it won't be from the grossly overpaid Board, Execs & jobsworths, but the lowly people who engage with the public. Shameful.

    Brilliant top rated post is nonsense (again). Investment banks are not retail counters. Hello? Aw forget it just rant against wealth if it makes you happy.

  • rate this
    +3

    Comment number 33.

    right so the highly paid execs who caused the financial meltdown and prolonged recession for the west as well as (libor, insider rate fixing, ppi etc.)will be the first to be shown the door I assume

    or

    they will get bonuses equalling 200% of their salary again with the words 'or else' to justify their worth

    one of these two will happen... wonder which

  • rate this
    +1

    Comment number 32.

    Bonuses should be reversed before lower-paid staff are sacked

  • rate this
    -1

    Comment number 31.

    Bankers suffering ?

    My heart bleeds.



    (Not)

  • rate this
    +2

    Comment number 30.

    Wielding the axe on the less well paid in the bank will ensure those at the top get their big fat bonus.They will then set some plebs back on - on zero hour contracts on less pay and it`s job done. In 2014 it`s the Tory way - greedy right wing selfish,who cares if we have soup kitchens,capitalism.

  • rate this
    +2

    Comment number 29.

    Always so friendly staff at my local branch. Their jobs on the line, the branch will probably get closed and I'm then reduced to phoning call centre's. Press 1 for this, press 2 for that.....you now have seven more options...!! Still, as long as the disgusting hierarchy of the bank get their huge annual bonuses, that's the main thing, right??

  • rate this
    +3

    Comment number 28.

    Really? Have you not linked this with the new EU financial transaction tax... They'll be adding jobs in Dubai to replace these.

  • rate this
    +4

    Comment number 27.

    --
    17.beesaman
    Any company that awards its management bonuses should not be allowed to fire staff.
    Or if you fire staff you can't award any bonuses for five years.
    --

    So... because one dept was terrible and did badly, or is an area no longer needed, the rest of the staff suffer.

    Heart-stoppingly naive economics. Let's hope Ed Balls is not reading this, he needs some new ideas!

  • rate this
    0

    Comment number 26.

    How about reducing the pay and bonuses of the fat cats on the Board rather than taking it out on the hard working, poorly paid people at the bottom of the ladder?

    I read on another website recently that Barclays are trialing removing humans from their branches and making customers use machines instead. Perhaps we need machines in the top roles, rather than the monkeys we currently have.

  • rate this
    0

    Comment number 25.

    Get rid of all the off shore call centre staff first, then weed out the local investment staff. Better to have the payments we make to the bank paid out to staff working in the UK, who will spend those earnings in the UK, rather than to staff overseas who do not contribute to the UK spending.

  • rate this
    +27

    Comment number 24.

    I have been banking with Barclays for 25 years. Our town centre branch just received a complete makeover "to provide a more efficient service": ALL customer counters have been removed and replaced with self-service machines. If you wish to deal with a human being you now need to make an appointment to see your "personal banker". I intend to move my account, but fear they will all follow suit soon.

  • Comment number 23.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +6

    Comment number 22.

    Yes the economy is showing signs of recovery

 

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