- POSTED: 08 May 2014 20:17
Scandal-hit Barclays said Thursday it will shrink its investment bank unit as part of plans to axe 19,000 jobs across the entire group over the next two years.
LONDON: Scandal-hit Barclays said Thursday it will shrink its investment bank unit as part of plans to axe 19,000 jobs across the entire group over the next two years.
The British lender will this year cut 14,000 positions, or one-tenth of its global workforce, more than an initial plan to remove a maximum of 12,000 jobs in 2014.
A total of 7,000 investment bank staff will lose their jobs by 2016 -- more than a quarter of the division's employees.
Barclays also said in a statement it will also create a "bad" bank housing assets with a combined value of £115 billion (US$195 billion, 140 billion euros) that would be sold or simply allowed to run down.
As part of the group's overhaul, Barclays will incur £800 million of extra costs, exit its European retail banking business and place a large focus on its Africa-wide and credit card businesses.
Chief executive Antony Jenkins has been on a mission to reduce the influence played by Barclays' investment bank unit over the entire group since replacing Bob Diamond -- the much-maligned former CEO who was forced to resigned following the 2012 Libor rate-fixing scandal.
"This is a bold simplification of Barclays," Jenkins said in Thursday's statement.
"We will be a focused international bank, operating only in areas where we have capability, scale and competitive advantage."
Jenkins, the former retail head of Barclays, said the bank would become "leaner, stronger, much better balanced and well positioned to deliver lower volatility, higher returns, and growth".
Barclays employs about 139,000 staff worldwide, while the investment bank unit has roughly 26,000 employees.
The bank will meanwhile create Barclays Non-Core -- a unit grouping "assets which do not fit the strategic objectives" of the group, the statement said.
"Barclays will look to exit or run down these assets over time," it added.
The majority of these so-called risk-weighted assets (RWAs), or about £90-billion worth, are currently under the control of the investment bank unit.
Barclays will rid itself also of £16 billion worth of Europe retail RWAs and £9.0 billion of other risk-weighted assets.
The bank expects to incur costs on top of the £2.7-billion restructuring amount it had announced 15 months ago.
Barclays' share price jumped 4.69 per cent to 254.70 pence in midday trading on London's benchmark FTSE 100 index, which was showing a gain of 0.46 per cent.
The lender earlier this week said pre-tax profits almost halved at its investment banking arm during the first quarter.
They dived 49 per cent to £668 million in the three months to the end of March compared with a year earlier, hit by sliding revenues.
Barclays is still seeking to fix a reputation badly damaged by its role in the Libor scandal, while it has also been probed along with other banks over possible manipulation of foreign exchange trade.
Despite poor earnings, Barclays increased the money available for staff bonuses by almost 10 per cent earlier this year, angering some politicians and union bosses.
The Libor scandal erupted two years ago when Barclays was fined £290 million by British and US regulators for attempted manipulation of Libor and Euribor interbank rates between 2005 and 2009. Euribor is the eurozone equivalent of Libor.
In addition, Barclays was last year forced into a huge £5.8-billion shares sale, or rights issue, to meet regulatory demands to strengthen its capital buffers.
Diamond, who headed the investment unit before becoming chief executive, was one of the world's highest paid bankers before and after the global financial crisis and helped to turn Barclays into a leading player in investment banking.