London - Barclays CEO Jes Staley has started a fresh round of cuts at the investment bank, with plans to eliminate more than 1 000 jobs worldwide and exit several Asian countries, people with knowledge of the matter said.
The UK bank plans to cut about 230 jobs in the Asia Pacific, including winding up its cash equities business in the region, one of the people said, asking not to be identified because the decision isn’t public. It will exit operations in Australia, Taiwan, South Korea and Malaysia and plans to maintain offices in Hong Kong, China, Japan, Singapore and India, and keep its prime brokerage and derivatives business in Asia, the person said.
Staley, a former JPMorgan Chase & Co banker who took over last month, is seeking ways to boost earnings growth and restore investor confidence by focusing on the bank’s most profitable businesses. He and Chairman John McFarlane are scheduled to present a broader strategic update alongside the bank’s full- year results on March 1.
“This suggests that they are having to be very aggressive to have any chance of boosting returns in the investment bank as a whole and it may imply a lack of patience by the chairman in terms of how long this process will take,” said Christopher Wheeler, an analyst in London with Atlantic Equities.
Bonus pool
Turmoil in global equity and commodity markets is adding to the urgency for banks to reassess which markets and business lines they want to compete in. Standard Chartered and Royal Bank of Scotland are among companies that have made broad cuts in Asia after deciding their operations there weren’t profitable enough.
A spokesman for Barclays in London declined to comment. The Financial Times reported earlier that the company will cut about 1 000 jobs.
The bonus pool for the investment bank may be cut by at least 10 percent from the previous year, one of the people said. The bank, which hasn’t made a final decision on compensation, plans to pay bonuses in March, later than the usual mid-February timing, according to a separate person.
The investment bank’s bonuses fell 24 percent to 1 billion pounds ($1.4 billion) in 2014 from 1.3 billion pounds in the previous year, according to the bank’s annual report. Total compensation costs for the division fell 9 percent to 3.6 billion pounds from 4 billion pounds over the same period.
Barclays fell 4.1 percent to 182.05 pence in London Wednesday, tracking a global rout in equity markets and extending its decline to 17 percent so far this year. The stock lost about 10 percent in both 2014 and 2015. Staley was hired as CEO after McFarlane fired Antony Jenkins over the perceived slow pace of restructuring.
Town hall
Barclays employees in Tokyo were informed of the cuts by the bank’s Japan President Eiji Nakaiin a 7.30 a.m. town hall meeting, according to people familiar with the situation. Nakai said the bank will close its cash equities operation in Japan and focus instead on derivatives, prime brokerage and electronic trading, the people said. About 80 positions in Japan will go, the people said.
In investment banking, which includes mergers advisory and underwriting stock and bond sales, 40 to 50 positions will be cut in Asia, one of the people said.
The bank is closing all its cash equity research, sales and trading as well as its convertible bond-trading businesses across Asia, according to a memo sent to clients that was seen by Bloomberg. Barclays’s equity-research team will stop covering stocks listed in Asia immediately, the memo said.
Deutsche cuts
Staley is the latest CEO to deepen cuts at its securities units as banks shrink to restore profit growth amid tougher capital rules and a cooling global economy. Morgan Stanley CEO James Gorman said this week he was “effectively done” with about 1 200 job reductions in fixed-income trading after concluding the outlook for the business is poor.
At Deutsche Bank, co-CEO John Cryan plans to eliminate about 9 000 jobs on a net basis by 2018, while Standard Chartered CEO Bill Winters plans to cut 15 000 jobs to help save $2.9 billion by 2018.
The Barclays CEO extended a hiring freeze indefinitely in December after discovering the bank had only cut about 3,000 positions since 2012 because it continued “hiring tens of thousands of people every year” during an earlier job-reduction program.
While the securities unit, headed by Tom King, contributes about a third of the bank’s revenue, it has the lowest profitability of four units with a 2.7 percent return on equity in 2014.
“Our focus is on the US and the UK with a global network that’s right-sized and that will be measured on profitability and returns,” King said of his strategy at a conference in September. “But all the time we’re monitoring our geographies, we’re monitoring our products, and we’re making adjustments.”
-With assistance from Lukas Strobl, Elizabeth Dexheimer, Takahiko Hyuga and Takako Taniguchi.
BLOOMBERG