Barclays to cut 19,000 jobs as it scales back investment bank business

More than half of overall losses will be in UK as part of shake-up by boss Antony Jenkins including creation of a 'bad bank'

theguardian.com, Jill Treanor, Thursday 8 May 2014

The cuts to Barclay's investment banking division come after a year CEO Antony
 Jenkins was criticised for increasing bonuses by 10% when profits fell 32%
 Photograph: Yui Mok/PA

Barclays is axing 19,000 jobs in a radical overhaul of its business, including a dramatic scaling back of its troublesome investment banking operations, where almost one in three jobs are to go. More than half of the 19,000 job cuts will fall in the UK.

Facing pressure to bolster the bank's profits, Barclays' chief executive, Antony Jenkins, said: "This is a bold simplification of Barclays. We will be a focused international bank, operating only in areas where we have capability, scale and competitive advantage."

The cutbacks will see the headcount reduced to 120,000 by 2016 although Jenkins has previously indicated the number could eventually fall to 100,000 as technology replaces people.

Barclays shares rose 3% in early trading despite concerns from analysts that the bank would lose revenue as a result of the cuts in the investment banking division, traditionally the group's powerhouse.

The investment bank, which was built up by Jenkins' predecessor Bob Diamond, is to lose 7,000 jobs from a workforce of about 24,000. The division – once known as Barclays Capital and the most controversial of the bank's business areas – shifts away from its traditional area of expertise in fixed income, currencies and commodities and more towards corporate finance and equities.

Jenkins, who replaced Diamond in the wake of the Libor rigging scandal, said in February that up to 12,000 jobs would go this year. That total is now being raised to 14,000 as another 2,000 jobs will go in the investment bank this year. That leaves 5,000 investment bankers facing redundancy by 2016.

The cuts to the investment bank take place after a year in which Jenkins was criticised for increasing bonuses by 10% when profits fell 32% because he feared what he described as a "death spiral" as top bankers defected.

Jenkins said the changes in the investment banking division were talking place because of regulatory demands that the bank hold more capital. "There have been two very significant changes in the last 12 months. Regulation has become much clearer, and the impact of regulation on certain aspects of the investment bank, which are much more capital intensive," he told CNBC.

"We also believe the economic environment has deteriorated for the FICC [fixed income, currencies and commodities] business and some of the pressures we saw on the business towards the end of last year are clearly structural as well as cyclical, so now is the right time to reposition the bank," he said.

He intends to reduce the proportion of the banks' assets used for investment banking from 50% to 30% by 2016, so that personal and corporate banking, Barclaycard and the business in Africa make up the majority of the business.

Unions expressed concerned about the impact on the high street bank, where there are expectations that Barclays will close more branches.

"These have been extraordinarily turbulent times for ordinary Barclays workers who have worked hard to keep the bank on track against a backdrop of continued uncertainty and redundancies. The bank needs to recognise their tireless work to put customers first while jobs have been lost and give reassurances over their futures," said Dominic Hook, a Unite national officer.

A noncore division – dubbed a "bad bank" – will be created to take on £90bn of unwanted business in the investment banking side, including commodities, derivatives and some emerging markets products, together with about £16bn deployed in the European high street bank businesses, including in Spain, which could be spun off in a stock market flotation, and £9bn from corporate, Barclaycard and the wealth division.

"As a consequence of these changes, Barclays will become significantly more balanced and in turn able to deliver higher, more sustainable returns through the cycle," the bank said.

Sandy Chen, analyst at Cenkos, said: "Let's be clear: shrinking the investment bank drastically and pulling back from European banking are good things to do for Barclays, and we agree with management that this will increase longer-term sustainable, through-the-cycle profitability. It's just the uncertainties involved with the next two to three years of hacking back the brambles that we're a bit concerned about – and the income-generating capacity of the severely pruned Investment Bank that will emerge".

Jenkins – who has set himself on a plan to turn Barclays into the "go to" bank – said the cuts would cost another £800m on top of the existing £2.7bn already announced to turnaround the group.