Barclays PLC, the scandal-hit British bank, is to cut 14,000 jobs this year in an attempt to streamline operations and reduce the importance of the investment banking division.
It said Thursday that further reductions will be made at the investment banking arm over the next two years, taking the total number of reductions at the bank to 19,000 by 2016.
The 325-year old bank, which is Britain’s second largest by assets, is undergoing a culture change after a string of scandals, including its involvement in the rigging of the Libor interbank lending rate.
Chief Executive Officer Antony Jenkins has made restoring trust a centerpiece of his mission in reforming the bank — and the investment banking division has been one his primary targets because of the risky behavior it undertook before the 2008 financial crisis. Jenkins underscored his wish to slim down operations and pledged to make Barclays “more balanced.”
“Barclays will be much less exposed to volatility in our investment bank; we will have a structurally lower cost base; and we will continue to invest for growth,” he said in a statement. “We will be leaner, simpler and stronger.”
The move further unravels the legacy of Bob Diamond, who expanded the investment banking arm before becoming CEO. His unapologetic attitude and colossal pay package made him the focus of much of the fury toward bankers in Britain once the scandals hit, and he was forced to resign.
Investment banking took the brunt of the job cuts, with 7,000 by 2016. Barclays said the division would account for no more than 30 percent of operations in the future — as opposed to half today.
Barclays is also creating a “bad bank” unit, which will house 90 billion pounds ($152 billion) of investment bank assets and 16 billion pounds of European retail banking assets. The hope is that the assets can be wound down or sold off eventually and to increase confidence in the overall health of Barclays.
The bank is also streamlining geographically, closing customer branches in Portugal, Spain, Italy and France, though it highlighted prospects in Africa, described as “an exciting, growing part of the world.”
Investec analyst Ian Gordon said Thursday’s decisions should help improve the bank’s underlying performance.
“Barclays is already a low-risk, profitable bank, but today’s ‘reset’ is about rightsizing the bank to reflect a smaller addressable (investment bank) revenue pool and to deliver improved/sustainable returns,” he said.
But the stark job numbers will give British leaders pause. Barclays has faced criticism in the past for ramping up its bonus pool, even as it prepared to cut jobs.
Dominic Hook of the Unite trade union, said that times had been turbulent for the bank’s workers, “who have worked hard to keep the bank on track against a backdrop of continued uncertainty and redundancies.”
“The bank needs to recognize their tireless work,” he said.