Barclays plans to cut 12,000 jobs

 

Barclays said it would axe up to 12,000 jobs this year even as it raised bonuses for investment bankers, prompting fury among politicians and unions who said it had not learned the lessons of the financial crisis.

Stepping up efforts to cut costs, Barclays said up to 9 % of employees could go, including 7,000 in Britain, where half of the affected staff had already been notified. The cuts are not concentrated in any single business area.

Britain's third-biggest bank said it paid 2.4 billion pounds in incentive awards last year after raising bonuses at the investment bank by 13 % despite a slump in profits from the business.

The average bonus across the investment bank's 26,200 staff was 60,100 pounds.

The combination of lay-offs and fatter bonuses drew indignation from Britain's biggest labour union.

"The culture change the bank promised will be less than skin deep if those at the top still hoover up obscene amounts of money while workers in call centres and branches struggle by on low wages and face the persistent pressure of job insecurity," said Ciaran Naidoo of Unite the Union.

Barclays Chief Executive Anthony Jenkins, who took the helm in 2012 after an interest rate rigging scandal, is attempting to improve culture and standards while also reducing risk and strengthening the balance sheet.

He defended the bigger bonus pot, saying the bank had to recruit the best staff to compete with global rivals and continued to have "constructive" talks with investors over pay.

"We need to recruit people from Singapore to San Francisco. We need the best people in the bank to drive long-term sustainable returns for our shareholders," Jenkins told reporters on a conference call.

"I understand that there will be some (people) who feel that this decision is the wrong one for Barclays. But it is the decision of the board and myself that this entirely is the right decision for the group and in the long-term interests of shareholders," he said.

Shares in Barclays had dropped 6.5 % to 257 pence by 1141 GMT, underperforming a 0.8 % rise by the European bank index.

Analysts said operating expenses were higher than expected and there was some disappointment at its capital ratio and that Jenkins did not increase his annual cost cutting target, which he said was already a "challenging" goal.

The higher bonuses lifted the compensation-to-income ratio in the investment bank to 43.2 % last year from 40 % in 2012. Jenkins, who gave up his own bonus for 2013, said he still aimed for a ratio in the "mid-30s" across the bank.

Barclays said 820 senior roles would go, and half of those were cut at the investment bank in the last two weeks.

It cut 7,650 jobs last year, including 1,400 in the investment bank, as part of a restructuring unveiled a year ago by Jenkins to cut 1.7 billion pounds of annual costs. There were 139,600 Barclays employees by the end of the year.

"TRANSFORMATION"

Jenkins said banking was going through a "100-year transformation" as technology and cost pressures reshape the industry, and he was optimistic that Barclays was well set for a "pivotal" 2014.

Investment bank profits slumped 37 % last year to 2.5 billion pounds, as income fell 9 % to 10.7 billion due largely to a fall in fixed income.

The investment bank made a loss of 329 million in the fourth quarter, hit by restructuring costs, a 220 million pound charge for litigation and regulatory penalties and a 333 million cost to pay a UK bank levy.

Revenue in the fourth quarter from fixed income, currencies and commodities fell 16 % from a year ago, echoing the weak performance across investment banks and not as steep a fall as seen at big rival Deutsche Bank . Barclays' equities income rose 9 % from a year ago, and advisory and underwriting income fell 5 %.

Barclays had already released headline results showing its earnings dropped by a third last year to 5.2 billion pounds, falling short of analyst forecasts due to the investment bank's slump.

The bank is successfully cutting its balance sheet, analysts said, and 196 billion pounds in the second half of last year was more than double its target, helped by 55 billion due to foreign exchange movements. Barclays said it would aim to cut at least another 63 billion pounds to get the balance sheet below 1.3 trillion pounds, based on the UK regulator's calculation of leverage exposure.

Barclays said it expected to improve its leverage ratio to at least 3.5 % by the end of next year, from just under 3 % at the end of last year and 2.2 % at the end of June. The UK regulator forced Barclays to raise 6 billion pounds from investors in October to improve the leverage ratio.

The bank said it remained committed to paying out 40-50 % of its adjusted earnings in dividends.