Barclays review: 3,700 jobs cut and tax unit axed – live
There are going to be shake-outs of individual banks as there have been. That does not mean that those banks won’t go from strength to strength and London’s lead won’t be lengthened as a financial centre.
The Mayor of London takes former Governor of California Arnold Schwarzenegger (right) for a ride on one of his ‘Boris bikes’
1009 Now that the dust has settled, it’s time to give Mr Jenkins’ strategic review a closer look.
While Mr Jenkins insists the new-and-improved Barclays will boost value for shareholders, he has not outlined how the bank will increase profitability – the number one question from buyers of equity.
Andre Spicer, Professor of Organisational Behaviour at Cass Business School is sceptical the revamped bank will ever return the profits seen in its “heyday”. He says:
This move is a gamble. It will inevitably lead to lower rates of profit in the future. It is also built on a move into an already crowded sector of the market – wealth management. It comes with significant collateral damage – 1,900 people will go in retail banking.
The strategy relies on a long and difficult process of culture change within the bank. While culture change may be sorely needed, actually delivering it will prove to be a very difficult task.
To some this move might seem crazy. But is a strategy which is less about increasing profits and more about rebuilding the tarnished image of the bank.
0945 Banks are the biggest risers on the FTSE 100 this morning.
Barclays has led the way, with shares up 4.5pc, while Lloyds Banking Group rose 2.8pc and RBS grew 2pc.
The FTSE 100 is up 17 – or 0.28pc – at 6294.
0942 City commentator Louise Cooper on how falling on harder economic times has facilitated Mr Jenkins’ reforms:
Antony Jenkins is hitting hard. He is sending a message to staff that the premier football league days of the past of over. In the words of a former Barclays investment banker on Panorama last night on the glory days “If you could bring home the bacon you could do anything”. But bacon is harder to come by now. Trading volumes in many markets are low and falling, there is little M&A or IPOs and yield curves are flat which limit trading opportunities. FX and Fixed Income are the only areas doing well.
The former CEO of Barclays, Martin Taylor said in Panorama last night ” I don’t think anyone in investment banking industry is worth what they were paid… utterly unjustified”. That may be true but Mr Jenkins can only enact this new lower pay, more moral regime because the profitability of investment bank has fallen substantially. It would be impossible to instigate his new rules in a booming business.
0920 The 105-page full year results statement disclosed (on p97) that Barclays is a defendant in a class action in the US linked to its role as a contributor bank to Libor. However Barclays finance director Chris Lucas said the bank does not believe it is “probable” it risks losses over civil lawsuits related to Libor.
0853 Barclays’ finance director Chris Lucas has said around 1,600 of the 1,800 redundancies at the bank’s investment arm have already been made.
Barclays’ finance director Chris Lucas
0839 Analysts have reacted positively to Barclays’ full-year results and strategic review, advising clients to buy or hold their shares.
Gary Greenwood at Shore Capital said the lender’s pre-tax profit missed expectations although the contribution from the investment bank was in-line with predictions. While he awaits more details from Mr Jenkins this afternoon he said the strategy “looks to be broadly as anticipated with a focus on capital, costs and risk reduction.”
Andrew Lim at Espirito Santo said the planned reduction in Barclays’ cost-base was greater-than-expected. He predicted the market would react well to a “more explicit and more aggressive” than anticipated plan to cut the banks’ riskier assets to £440bn by 2015, “well below most analysts’ estimates”.
0824 Our banking correspondent Harry Wilson has cast his eye over changes in bonus payouts at Barclays in 2012.
Bonuses were down year-on-year, with the 24,000 staff in the investment banking division set to receive an average annual bonus worth £54,100, down from £65,085 last year. The investment bank’s total bonus pool was this year worth £1.39bn, down a fifth, while the total group compensation pot was worth £2.2bn, compared to £2.6bn in 2012.
0820 The Sun’s @steve_hawkes reports that only 200 of the 3,700 axed jobs affect UK roles.
Of the 3,700 job cuts at Barclays just 200 in the UK .. still no answer on how much UK corporation tax they’ve paid
0815 A closer look at the bank’s full year results reveals a much more subdued picture.
The headline pre-tax profit figure reported earlier (0725) stripped out two major hits to the bank’s finances, namely a £4.6bn charge against the value of its own debt and a £2.45bn of provisions against the cost of compensating customers missold payment protection insurance and interest rate swaps.
Taking these costs into account, full year pre-tax profit for 2012 was virtually wiped out, diving 96pc to £246m from £5.9bn.
0803 Some early reaction on Antony Jenkins’ overhaul from the Twittersphere:
Whatever your view on bankers, 3,700 job losses by anyone’s standards is miserable. A lot of worried families & friends. @VFritzNews
Anthony Jenkins – strong on management speak – but let’s see actions & trials/prosecution of those suspected of crimes. @HonestyBanking
0751 The strategic review also pledges some wider cultural changes, namely ‘to provide greater disclosure and transparency around our financial performance’ and ’embed our purpose and values across Barclays and publish and annual scorecard assessing our performance’
0748 Antony Jenkins has just been interviewed on Radio Four’s Today programme. He says the overhaul at Barclays will boost value for shareholders as well as improve the bank for its customers.
The chief executive insists the bank will not lose market share by refusing to sell products that are not in customers’ interests. He laid down a firm line on staff compliance, saying:
If you don’t want to work this way, you can go work somewhere else.
Mr Jenkins also said the bank’s bonus culture was changing. He pointed out that on the bank’s total spend on remuneration was down 16pc in the group and down 20pc in the investment bank in 2012, and that the ratio of pay to net profit had fallen to 38pc from 42pc. He told added that this ratio would continue on a “downward path” to the mid-thirties in coming years.
We were too short term focussed and that’s something that will change
In my view the returns in financial services which were historically driven by leverage, those days are gone. Banks have to reposition themselves to become more efficient and effective to serve customers and clients.
Antony Jenkins said that staff who don’t like the changes at the bank can leave
0725 We’ve also had Barclays’ full-year results for 2013, which report adjusted pre-tax profit up 26pc to £7.05bn, and 2pc revenue growth to £29bn. The group put aside £3.6bn for PPI and swap misselling compensation.
Meanwhile the bank posted statutory pre-tax profits £246m, down from £5.88bn last time.
0713 Antony Jenkins, Barclays chief executive, said in a statement accompanying:
Barclays is changing. We have today set out a new course for the future of Barclays.
I am extremely proud of the way our 140,000 staff have overcome the difficulties of the last year and shown the resilience necessary to deliver the results we announced this morning.
It gives me great confidence in our ability to deliver our goal and from today I am determined that no-one should be able to question our intent or our commitment to the path that I have set out.
0705 The bank has just published the outcome of its strategic review. It plans to:
• cut 3,700 jobs across the group in 2013
• close the tax avoidance unit
• achieve common equity tier 1 ratio above its target ration of 10.5pc in 2015
• boost dividend payouts from 2014, targeting a payout ration of 30pc over time
• narrow down the business to focus solely on activities that support customers and clients in markets where Barclays has scale and “competitive advantage”
• focus investment activities in the UK, US and Africa, while maintaining an “appropriate” presence across Europe and Asia
0700 Good morning and welcome to our live coverage of Barclays’ much-anticipated strategic review