Barclays’s securities unit a likely target of deep cuts
LESS than a week into his new job, Barclays chief executive Jes Staley is mulling deeper cuts at the securities unit that could see an additional 20 percent of bankers lose their jobs, according to people with knowledge of the matter.
Barclays Bank owns a 62.3 percent stake in Barclays Africa Group, which is listed on the JSE.
Under the plan, the bank was looking to eliminate jobs in Asia and the global cash equities business, the people, who asked not to be identified because the strategy is private, said on Friday.
The cuts, which would come on top of an existing programme to reduce 7 000 jobs at the investment bank through 2016, could be announced early next year, with the Asia securities division not considered competitive and profitable enough, they said.
“The focus of Barclays’s ‘new’ investment bank is the US and the UK and everything else is peripheral, so no surprise Asia is taking the biggest hit,” said Christopher Wheeler, an analyst in London with Atlantic Equities. “The problem is that the investment bank has been subject to ‘death by a thousand cuts’ and morale has been hard hit. It must be hoped this is the last big culling, if the franchise is to survive.”
Staley, who took over at the start of this month, has been tasked with improving profitability at the investment bank, which is lagging the lender’s other divisions and has been hurt by rising costs tied to past misconduct and tougher capital requirements.
Since joining in April, chairman John McFarlane has pledged to refocus the business on the UK and US and has said the bank is reviewing the contributions of operations in Asia and the Middle East, because “we don’t like places that don’t make money”.
A spokeswoman at Barclays said on Friday that the bank was “constantly monitoring our opportunities in different geographies and businesses”.
Barclays employed 20500 people at the securities unit at the end of 2014.
“The investment bank is the place where we think the returns can be boosted most,” Sandy Chen, an analyst at Cenkos Securities in London with a hold recommendation on Barclays shares, told Bloomberg Television’s Jonathan Ferro yesterday.
Staley “is getting his feet on the ground. He knows investment banking, he knows how to handle all the weaponry on various desks”.
Barclays rose 1.1 percent to 232.10 pence at 8.55am in London, paring losses this year to about 4.6 percent.
Barclays does not break out figures for the cash-equity business. The bank has been cutting costs at its Asia-Pacific operations, where it generated revenue of £776million (R17billion) last year, about 3 percent of its total, compared with £12.4bn in the UK.
The bank employed 18200 staff in the region at the end of last year, according to its annual report. Other banks are also shutting businesses to focus on more profitable areas.
Morgan Stanley was planning to cut as much as a quarter of its fixed-income staff after years of revenue declines and insufficient returns, people with knowledge of the plans said last week.
Standard Chartered, which makes almost all of its profit in Asia, said last month that it would eliminate 15 000 jobs to help save $2.9bn (R44bn) by 2018.
When he was appointed in October, Staley told staff he would “complete the necessary transformation and repositioning of the investment bank to a less capital-intensive model” and restore a “collaborative” relationship with regulators.
While the securities unit, headed by Tom King, contributes about a third of the bank’s revenue, it has the lowest profitability of four units with a 2.7 percent return on equity last year.
“Incremental cuts will make total sense in the context of the weak revenue outlook” for the investment bank, said Ian Gordon, an analyst at Investec.
Gordon estimates Barclays will cut £600m of costs from the investment bank between 2014 and 2017, with group revenue set to drop 3 percent this year.
Staley, a former JPMorgan Chase investment banker, inherited a strategy from his predecessor Antony Jenkins that involved cutting about a third of employees at the division. – Bloomberg