BARCLAYS boss Antony Jenkins yesterday banished the ghost of Bob Diamond as he took an axe to highly paid staff at the investment banking division built up by his predecessor.
Shares rose 7.9 per cent as the bank said it was cutting 2,000 jobs this year and a further 5,000 by 2016 at the unit whose huge bonuses have fuelled public and shareholder anger. It was also signalled the number of £1 million-plus bankers would fall.
The cull comes after investor anger earlier this year when bonuses at Barclays Capital, or Barcap, went up 10 per cent to £2.38 billion despite falling profits.
Group chief executive Mr Jenkins – whose background is that of a high street banker unlike his colourful investment banking predecessor Mr Diamond – said in yesterday’s strategic update that it was a “bold simplification” of Barclays.
Greater prominence will be given to the group’s retail banking operations in Britain, its Barclaycard credit card division and its African business, he said.
The parent group is now targeting 14,000 job cuts this year, up from a previous target of 10,000 to 12,000. The extra 2,000 will all come from the investment bank, with most expected to be in the City.
The changes will dramatically shrink the importance of Barcap to its parent, with the assets employed in it being cut to 30 per cent of the whole group, from 50 per cent currently. Mr Jenkins said he could use the capital now tied up in the investment bank in areas such as Barclaycard or Africa and “get a better return with lower volatility”.
The strategic review will also see Barclays hive off its loss-making European retail banking business in Italy, France, Spain and Portugal into a separate “non-performing unit”, comprising £400bn of assets now deemed non-core.
Barclays aims to sell this business, which employs nearly 6,000, over time, or run it down.
City banking experts said the move was, in effect, a dismantling of Mr Diamond’s investment banking empire, and a firm reining in of Barcap’s aspirations to take on “bulge bracket” US investment banking behemoths such as Goldman Sachs, JP Morgan and Bank of America Merrill Lynch. It comes two days after Barclays announced that first-quarter profits at the division fell by half, meaning group profits dropped 5 per cent.
In future, Mr Jenkins added, Barcap will focus mainly on the UK and US, which accounted for 60 per cent of the global investment banking market, and on its top 1,000 clients who produced 70 per cent of the division’s revenues last year.
He said it would also lead to “a rebalancing in favour of shareholders more quickly” when it comes to the way money is carved up in bonuses and dividends. “We don’t have an explicit target to reduce the number of people paid over £1m, but we do expect that number to come down over time,” Mr Jenkins said.
Public anger over the causes of the financial crisis, together with scandals such as rigging the Libor rate, have damaged the image of so-called “casino” banking – as opposed to traditional retail branches.
When the full 7,000 job cuts at Barcap go through the division will still employ 19,000, and will remain the biggest investment bank in Europe.
Asked why the radical retrenchment was not done when he announced his first strategic review under two years ago, Mr Jenkins said it was not clear at that time the extra regulatory capital demands that were to be made on UK and European banks.