LONDON: Britain’s Barclays reined in its ambitions to be a Wall Street powerhouse yesterday and signalled a return to its retail roots with a plan to hive off much of its investment bank and axe one in four jobs at the division.
Chief Executive Antony Jenkins, in his second strategic review in as many years, will cut 19,000 jobs in the next three years, 7,000 of them at the investment bank, and park £400bn of assets in a new “bad bank”.
A slide in trading revenue due to investor uncertainty and tough post-crisis regulation combined with a string of senior staff departures and a row with shareholders over bonuses have forced Jenkins to take a knife to the investment bank, built up under predecessor Bob Diamond and once the firm’s profit engine.
Jenkins said the recent halt in the trading boom was not just a cyclical ebb but was partly permanent, as regulators have tightened the screws on large banks in the past 12 months, making some trading activities too costly to pursue. “We will refocus and resize our investment bank to bring balance to Barclays,” he told analysts and investors. “As currently constituted, it is an unacceptable drag.”
Barclays will park some €90bn worth of risk-weighted assets from the investment bank in the bad bank, including some commodities and emerging markets products and some of its derivatives book. The move echoes UBS, which in 2012 decided to exit the riskiest fixed-income trading areas and set up a non-core division to house around 90bn Swiss francs of mainly investment banking risk-weighted assets. Since the creation of its in-house bad bank, UBS’s shares have risen nearly 40 percent.
Barclays’ investment bank will be left with €120bn of risk-weighted assets and, while significantly smaller than US players such as JP Morgan, will still be the largest investment bank in Europe with more assets than the “core” businesses of Deutsche Bank and Credit Suisse after they also streamlined their operations.