Data provided by iNet BFA
Loading...
See More

Barclays revamp could mean staff cuts

Nov 30 2012 14:25 Reuters

Barclays bank (AFP)

Company Data

BARCLAYS AFRICA GROUP LIMITED [JSE:BGA]

Last traded 171.74
Change 2.74
% Change 0.02
Cumulative volume 467436
Market cap 145.59bn

Last Updated: 28/07/2014 at 03:40. Prices are delayed by 15 minutes. Source: McGregor BFA

Related Articles

Qatar cashes in Barclays warrants

I will reform Barclays - new CEO

Absa, Barclays talks still under way

New Barclays CEO rejigs banking structure

Barclays boss to cut investment banking

Barclays hit by fresh US probe

 

London - The parent company of Absa Group [JSE:ASA] Barclays could axe as many as 3 500 investment bank staff and cut its advisory or equities operations in Asia as part of a broader strategic review aimed at fixing the bank's culture in the wake of the financial crisis.

The future shape and size of the investment bank is seen as the most critical part of CEO Antony Jenkins' review, as it contributes more than half of group profits but conducts the "casino" activities politicians and regulators are cracking down on.

The British bank was fined $450m in June for rigging Libor interest rates, which forced its chairperson and chief executive to quit.

Barclays' reforms are not expected to be as radical as those of rivals UBS and Royal Bank of Scotland, who are pulling back sharply, but sources say tough choices loom.

Jenkins will need to take action to cut costs and ensure the business is profitable under tougher new rules, and show the public and politicians that he has tackled culture and conduct, they said.

Activities that make low returns or lack scale are at threat, and the bank has said it will also stop anything that may harm its reputation, like tax advisory and agricultural commodities trading.

Jenkins is not due to unveil his "Project Transform" until February, but Project Mango, as the investment bank revamp has been named by the unit's boss Rich Ricci, is close to being wrapped up.

"Barclays is at an interesting crossroad," analysts at BernsteinResearch said in a note to clients.

"On one hand, the bank seems likely to be one of the winners as competitors exit FICC (fixed income, currencies and commodities) ... on the other hand, the unit has faced increased hostility from regulators and investors alike, especially following the Libor crisis."

Uncertain backdrop

All investment banks are reassessing their shape and size, but regulatory change has created an uncertain backdrop.

The Bank of England told UK banks this week they need more capital and US regulators signalled they will toughen rules for foreign firms, both potentially shifting how Barclays views some operations.

The actions of rivals may also sway plans - UBS's pullback, for example, could open gaps that Barclays may want to exploit.

"There will be a lot of stuff in the middle that's marginal. He (Jenkins) may not want to commit to what happens to those areas until the regulations are clearer," said Gary Greenwood, analyst at Shore Capital.

Goldman Sachs analysts said Barclays could cut 15% of investment bank staff, or 3 500 of its 23 300 employees, and adjust its equities and equity capital markets operations outside the United States and selected European markets, and its M&A advisory across the Asia Pacific.

"We consider a broad-based but organic realignment of the unit - including balance sheet shrinkage and the exit from subscale operations as well as cost cuts and staff reductions - the most likely strategic outcome," they said in a recent note.

The business would struggle to deliver a sustainable return above its cost of capital due to new capital rules and a 900 million pound annual hit from having to separate retail and investment banking operations under new UK rules, requiring the bank to "shrink to fit", Goldman said.

Ricci, who helped build up the investment bank into a debt market powerhouse and helped lead a push to be one of a handful of top global firms, is assessing the business in 54 parts, helped by financial advisory and accounting firm Deloitte.

Project Mango - named after a fruit that in some cultures is seen as a symbol of attainment - involves screening activities first for reputational risk, then assessing culture and leadership, and then deciding whether they deliver decent sustainable returns, he said.

"We've turned the analysis on its head. We've put the reputational risk analysis very front and centre," Ricci told lawmakers on Wednesday as part of an inquiry into banking industry standards.

There would be "demonstrable change" from the review, he said.

 

Follow Fin24 on Twitter and Facebook

absa group  |  barclays  |  banks
NEXT ON FIN24X

 
 
 

Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
1 comment
Add your comment
Comment 0 characters remaining
 

Company Snapshot

We're talking about:

Small Business

A cash flow crunch often occurs in small businesses trying to balance cash coming in with cash going out. Watch this video to help you improve.
 
 

No more nice-to-have shopping sprees

Fin24 user Asia writes how she managed to rehabilite herself from splurging on feel-good iitems and keep clean from the bondage of lifestyle debt.

 
 

Start saving...

Time the key for retirement saving
Dummy's guide to saving
Save money with affordable account
All about endowments

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...
Loading...