Steve Slater and Matt Scuffham London
British bank Barclays expects to axe up to 12 000 jobs this year to cut costs and counter falling income at its investment bank, where profits slumped last year.
But it is also paying staff higher bonuses, risking a backlash from the politicians and taxpayers who bailed out much of the industry during the financial crisis.
Barclays holds a controlling stake in Absa, which is now named Barclays Africa Group although it retains the Absa brand name in South Africa.
The bank said yesterday that 7 000 of the jobs would go in Britain and half the affected staff there had already been notified. The cuts were not concentrated in any single business area.
Chief executive Antony Jenkins, who took the helm in 2012 after an interest rate rigging scandal, is pulling Barclays out of some investment banking activities as part of efforts to clean up standards and improve returns. Last year the bank targeted £1.7 billion (R31bn) in annual cost savings.
It said it paid £2.4bn in incentive awards last year after raising bonuses in its investment bank by 13 percent despite the profit decline.
That helped to lift Barclays’s compensation-to-income ratio to 43.2 percent last year from 40 percent in 2012. It said it was still aiming for a compensation ratio in the “mid-30s”.
Jenkins defended the increases, saying Barclays had to compete with global rivals to recruit the best staff. He said the bank was having constructive talks with investors over pay.
“We need to recruit people from Singapore to San Francisco. We need the best people in the bank to drive long-term sustainable returns for our shareholders,” Jenkins said.
The bank had already released headline results showing earnings dropped to £5.2bn last year, down 32 percent from 2012, falling short of forecasts as investment bank revenue slumped in the fourth quarter.
Profit at the investment bank slid 37 percent to £2.5bn as income fell 9 percent to £10.7bn – largely because of decreases in fixed income.
Barclays said it expected to improve its leverage ratio to at least 3.5 percent by the end of next year as it reduced its balance sheet.
Its leverage ratio improved to just under 3 percent by the end of the year from 2.2 percent at the end of June. The UK regulator forced Barclays to raise £6bn from investors in October last year to improve the ratio.
The bank said it remained committed to paying a dividend of between 40 percent and 50 percent of adjusted earnings.
Barclays cut its balance sheet by £196bn in the second half of last year, significantly more than the reduction of between £65bn and £80bn it had targeted, helped by foreign exchange movements.
It said it aimed to cut at least another £63bn to get the balance sheet below £1.3 trillion, based on the UK regulator’s calculation of leverage exposure.
Barclays shares had lost 5 percent to £2.6148 by early afternoon in London. – Reuters