Barclays Cuts Up to 12,000 Jobs as Quarterly Profit Falls
By Howard Mustoe and Gavin Finch Feb 11, 2014 8:36 PM GMT+0800 7 Comments Email Print
Barclays Plc (BARC), the U.K.’s second-biggest bank by assets, will eliminate as many as 12,000 jobs this year after fourth-quarter profit tumbled.
About 7,000 of the cuts will be in the U.K., Chief Executive Officer Antony Jenkins told reporters on a conference call today. Adjusted pretax profit fell to 191 million pounds ($314 million) in the fourth quarter from 1.4 billion pounds in the year-earlier period, Barclays said. The bank will set aside 2.4 billion pounds for 2013 bonuses, up from 2.17 billion pounds.
Jenkins is cutting jobs to remove 1.7 billion pounds of costs by 2015 as the bank faces charges relating to litigation and regulatory penalties and regulators impose tougher rules on capital. The cuts may need to step up if the lender wants to compete with investment banks in the U.S., said Chirantan Barua, an analyst at at Sanford C. Bernstein Ltd. in London
“To be serious they structurally need to cut 15 to 20 percent of managing directors, straight off,” said Barua, who has a market perform rating on the stock. “The cost-cutting story from Barclays will get even more painful given the recovery of the U.S. broker-dealers.”
Cost Target
The stock dropped 5.2 percent to 260.6 pence by 11:33 a.m. in London trading today. The bank has fallen 6.7 percent in the past 12 months, lagging behind the FTSE All Share Index’s 8.1 percent advance in the period.
Jenkins said today he’s confident of achieving his cost target even as expenses as a proportion of revenue rose to 71 percent in 2013 from 63 percent in the year-earlier period.
The investment bank had a pretax loss of 329 million pounds in the last three months of the year, compared with a profit of 760 million pounds in the year-earlier period.
Jenkins is cutting costs at the investment bank and demonstrate the lender has changed its culture after the company was fined for manipulating benchmark interest rates. The company said today managing directors’ performance has been assessed against whether they showed “the right values and behaviors.”
Barclays will cut 220 managing directors and 600 director-level employees, Jenkins said. The reductions come after the lender eliminated 7,650 positions in 2013. The bank employed a total of 139,600 people at the end of last year.
Incentive awards at the investment bank rose to 1.57 billion pounds, or about 60,100 pounds for each employee, from 1.39 billion pounds, about 54,500 pounds a person, Barclays said. Jenkins has said he won’t take a bonus for last year.
Competitive Pay
“We pay for performance and we pay competitively,” Jenkins, 52, said in an interview with BBC Radio 4 today. “interview on BBC Radio 4 today. ‘‘We employ people from Singapore to San Francisco -- we compete in global markets for talent. If we’re to act in the best interests of our shareholders we have to ensure that we have the best people in the firm.’’
The company paid 859 million pounds in dividends to investors, or 6.5 pence a share.
‘‘It cannot be right in any business for the executive bonus pool to be nearly three times bigger than the total dividend pay out to the company’s owners,’’ Roger Barker, director of corporate governance at the Institute of Directors, said in an e-mailed statement. He was referring to awards across the bank. ‘‘The question must be asked –-for whom is this institution being run?’’
‘Remain Committed’
Costs as a proportion of revenue ‘‘rose in 2013 mainly as a consequence of reduced income, but we remain committed to achieving a ratio in the mid-50s by 2015,’’ Barclays said.
Fixed-income, currencies and commodities revenue, the single biggest source of income for Barclays’s investment bank, fell by 16 percent in the fourth quarter from the year-earlier period, while income from investment banking, which includes underwriting and mergers advisory, shrank 5 percent, Barclays said.
The five biggest U.S. investment banks saw their total revenue from trading fixed income, currencies and commodities, a mainstay of the business, fall 4.2 percent to $10.2 billion in the fourth quarter, data compiled by Bloomberg Industries show.
Full-year pretax profit at the investment bank declined 37 percent to 2.52 billion pounds from the year-earlier period. That missed the 2.99 billion-pound average analyst estimate compiled by the bank. Revenue declined 9 percent to 10.7 billion pounds.
Regain Trust
Barclays yesterday reported a 26 percent drop in annual adjusted pretax profit to 5.2 billion pounds, missing the 5.4 billion-pound consensus analyst estimate compiled by the bank. Net income was 540 million pounds, compared a loss of 624 million pounds the year earlier as impairments shrank. Adjusted return on average shareholders’ equity, a measure of profitability, declined to 4.5 percent, from 9 percent.
Barclays, which is striving to regain trust following a series of scandals including the manipulation of Libor benchmark interest rates, said last month it would take a 330 million-pound charge relating to penalties and lawsuits in the fourth quarter.
The bank has said it’s in talks with regulators about a possible criminal leak of client account information. As many as 27,000 customer files containing personal and financial information were taken, the Mail on Sunday reported on Feb. 9, citing an unidentified whistle-blower. It’s unclear how the files were stolen, the newspaper said, adding data was sold to brokers to be used for ‘‘investment scams.”
Barclays’s core Tier 1 equity ratio under the latest rules set by the Basel Committee on Banking Supervision fell 30 basis points in the quarter to 9.3 percent. That was 30 basis points below the estimate of Jason Napier, an analyst at Deutsche Bank.
The lender’s capital as a percentage of assets, or leverage ratio, was 3 percent, ahead of its plan to to reach the figure by June. The bank raised 5.8 billion pounds from shareholders in a rights offering in October.
The lender’s wealth and investment management business posted a 73 million-pound loss for the quarter from a 105 million-pound adjusted pretax profit in the year-earlier period.
To contact the reporters on this story: Howard Mustoe in London at hmustoe@bloomberg.net; Gavin Finch in London at gfinch@bloomberg.net
To contact the editor responsible for this story: Keith Campbell at k.campbell@bloomberg.net
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