A controversial tax avoidance unit is being closed and at least 3,700 jobs will go across the group. As most will fall in the investment banking division, it is clear that Jenkins is prepared to create a cleaner, more outwardly-facing bank even if it means making sacrifices in those areas which generate a large part of its profits.
Those profits will be lower in future, but so will bonuses. Jenkins himself said the bank had been “self-serving and too aggressive” and needs cultural change.
He wants to rebuild trust by shifting the focus of Barclays’ operations to the customer and the investor and, by and large, the latter is certainly liking what is on offer. The shares are up 60 per cent over the past six months alone and shot to the top of the FTSE-100 yesterday when the statement was released. A big dividend increase confirmed that shareholders would be getting a better deal in future.
However, market reaction was not universally positive. There is some concern that Jenkins will cripple the investment banking business, prompting a further erosion of profits.
On the other hand, he has faced criticism that his Project Transform is little more than PR window dressing and that, once the dust has settled over mis-selling scandals and bonus payments, the bank will revert to type. The bonus pool may be lower, but is still just under £2bn and looks like a reward for failure.
Whether or not the review revolutionises Barclays, those affected by these changes will feel some pain and the balance sheet will suffer. The cost of implementation alone will be £2.7bn over three years.
But these look small prices to pay for rebuilding a bank which has been tarnished by malpractices, faced questions over its dealings in Qatar and receives more complaints than any other.
Hearts in mouths in Ukio Bankas probe
HEARTS football club, despite public utterances to the contrary, will be nervously awaiting developments at Ukio Bankas, which is now under the control of a temporary administrator amid concerns at Lithuania’s central bank about the way it is being run (the bank, not the club, though it could be both).
The Tynecastle club is majority owned by UBIG which, it points out, is a separate entity from Ukio Bankas. However, UBIG shares a common shareholder with the bank - Russian-born Vladimir Romanov. He has to find answers to claims surrounding the bank’s poor compliance procedures.
In a filing to the Nasdaq OMX stock exchange, the Bank of Lithuania said Ukio Bankas had failed to provide it with assurances that management will improve, that its capital will be strengthened and that “other deficiencies” in its operations will be rectified. It is a no-holds-barred statement which also accuses Ukio Bankas of “violations of legal acts”.
Hearts players who have suffered involuntary pay holidays, and fans frustrated by Romanov’s antics since he bought the Edinburgh club in 2005, will note that, until a solution to its problems is found, the bank will not be providing financial services. But as it is a separate entity, that should not be a problem.