Roundup: Barclays outlines reform agenda, boosting share price
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E-mail Xinhua, May 9, 2014
Barclays Plc, the second largest bank in Britain in asset term, announced Thursday that it will cut 19,000 jobs to 2016, 7,000 jobs of them at its investment bank, in order to focus on its core business and cut costs.
The bank's ambitious reform boosted its stock price in London, posting a 7.87-percent increase to 262.45 pence (4.44 U.S. dollars) per share and topping the gainers of the benchmark FTSE 100 index.
In its second strategic review statement, Barclays has revised its overall 2014 Group gross headcount reduction from the previous announced 12,000 to 14,000, said Antony Jenkins, Group Chief Executive in a statement.
"We are revising cost guidance for 2014 Group operating expense to around 17 billion pounds, down from our earlier target of 17.5 billion pounds. We are also now establishing a 2016 cost objective for the Core bank of less that 14.5 billion pounds," said Jenkins.
The group will cut its investment bank's share of the firm's asset to 30 percent by 2016 from around 50 percent. It also plans to form a bad bank to dispose of 115 billion pounds of assets, including parts of its fixed-income, currencies and commodities derivatives operations, as well as European consumer affiliate.
"The Barclays of the future will be a focused international bank with four core businesses, better balanced within the Group and each positioned to win in its field, including Personal and Corporate, Barclaycard, Africa and the Investment Bank," he noted.
Lei Mao, Assistant Professor of Finance at Warwick Business School, told Xinhua that "almost all European banks are not performing well in fixed incomes like bonds and in currencies and commodities, but Barclays' loss of revenue in this sector is the most significant, with it falling by 41 percent."
"The response of Barclays to cut its investment bank section is timely. Barclays is not likely to reverse the diminishing trend of this business as the whole market is on a downturn because of uncertainty over interest rates and electronic trading taking over," said Mao.
Two days earlier, Barclays posted an adjusted profit before tax of 1.693 billion pounds in the three-month to 31 March, 5 percent lower than that in the same period a year earlier. Investment Bank's income, however, was down 28 percent.
Refocusing on the retail banking sector is a smart move, as strong recovery of British economy would blossom the sector's prospect, noted Mao.
Bunding its investment bank assets and its European continental business into a "bad" bank is also a sensible decision, since it will not contaminate its core retail banking sector, he added. Endi
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