Barclays sounded a retreat from global investment banking as it slashed 7,000 jobs from what was once the heart of its business and moved more than half of the unit’s assets into a “bad bank”.
The withdrawal from large parts of its fixed income, commodities and trading operations leaves Deutsche Bank as the last European investment bank with ambitions of competing toe-to-toe with the “bulge bracket” groups on Wall Street.
Following in the footsteps of rivals UBS, Credit Suisse, and Royal Bank of Scotland, Barclays said it was cutting more than a quarter of staff in its investment bank and moving £400 billion of assets – many of them from its trading book – into a non-core unit.
Investors welcomed the shake-up, sending shares in Barclays up almost 8 per cent.
One top 20 investor said: “This was a division built to do £16 billion or £17 billion of revenue and management is now admitting that they can’t achieve that.”
Analysts said that the UK’s higher regulatory requirements were driving the strategic shift.
“This is about the UK’s regulatory backdrop that makes it much harder to operate a global investment bank than in Germany or the US,” said Raul Sinha, banking analyst at JPMorgan Chase.
Mr Sinha said Barclays was put at a “significant disadvantage” compared with US, German and French rivals by higher capital requirements, the need to ringfence its UK retail bank and rules forcing it to defer a greater proportion of pay.
Barclays outlined plans almost to halve its investment bank from half of risk-weighted assets to less than a third, in an effort to create what chief executive Antony Jenkins called a “leaner, stronger, much better balanced” bank. He added that to achieve its target of stripping out £1.7 billion of costs this year, it would cut 14,000 jobs from its 140,000-strong workforce by December.
George Osborne, UK chancellor, said Barclays was “seeking to build a bank that is focused on its customers. “Any job loss is regrettable, but we do want banks that are supporting the British economy,” he added
Risk-weighted
Barclays' non-core unit will consist of £115 billion of risk-weighted assets – including £90 billion from the investment bank – which will be wound down or sold. That is more than double the value of the assets it identified as non-core last year.
Mr Jenkins’s cutbacks end the global ambitions of his predecessor Bob Diamond, who completed the Lehman deal in 2008 to turn Barclays into “a premier global investment bank”. The new CEO, dubbed St Antony for his pledge to clean up the lender’s culture, said he aimed to be a “focused” international bank.
The bank said it was retreating from some of its Asian activities and focusing on its biggest investment banking clients in the US and UK.
– Copyright The Financial Times Limited 2014
