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Business News/ Companies / Barclays to cut 3,000 jobs as profit drops
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Barclays to cut 3,000 jobs as profit drops

Barclays to cut 3,000 jobs as profit drops

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London: Barclays is set to cut about 3,000 jobs this year to reduce costs after a drop in bond trading and an insurance mis-selling charge caused first half profits to fall by a third.

The British bank’s performance was more resilient than rivals, however, as bad debts tumbled and it kept costs steady. Its shares were little changed in early trading on Tuesday.

“It’s better on costs and impairments, and within the revenue line BarCap had a relatively strong quarter compared to its peer group," said Mike Trippitt, analyst at Oriel Securities. “It has been a savage market out there."

Chief executive Bob Diamond, the American who built investment banking unit BarCap into a debt market powerhouse over the previous decade, said Barclays had cut 1,400 jobs during the first half and the tally was likely to rise to about 3,000 by the end of the year.

That would amount to around 2% of Barclays’ total workforce, which numbers 147,000.

“We haven’t set specific headcount numbers, but I would expect the trend in the first half to continue and I think it would be likely to increase," Diamond said.

There has been speculation that Barclays would cut back in investment banking, but Diamond declined to comment on where the job losses would come, saying they would be across the board.

“A key part of getting our returns to where we want them to be is the cost programme we have put in place and that is going well," he told reporters on a conference call.

Barclays joins a growing line of banks, including HSBC, Goldman Sachs , Credit Suisse and UBS to announce jobs cuts in recent weeks.

Pretax profit for the six months to the end of June was 2.6 billion pounds ($4.3 billion), down 33% from a year ago but above the average forecast of 2.4 billion pounds among analysts polled by the company.

Shares in Barclays were up 0.1% at 217.25 pence by 0830 GMT, in line with a flat European bank index .

French rival BNP Paribas also reported results on Tuesday, falling short of expectations due to a hit from its Greek exposure and sluggish retail growth.

Revamp plan

Diamond is aiming to cut £1 billion of annual costs and reckons he can generate more than £6 billion per year of extra revenue by 2013 under a revamp plan.

The bank’s return on equity improved to 9.1% in the first half from 6.9% a year ago. Diamond is targeting a level of 13% by 2013.

Problems around peripheral euro zone countries were likely to continue in the second half, before a recovery in market confidence late this year or early 2012, he said.

Weakness at investment bank arm BarCap had continued into July, the bank said.

BarCap’s income fell to £2.9 billion in the second quarter, down 14% on the first quarter, but BarCap’s co-CEO Rich Ricci said he remained confident it can hit its targeted £3.5-3.6 billion of quarterly income in normal market conditions.

Fixed income trading plunged across the industry in the second quarter as the euro zone debt crisis curtailed activity. BarCap’s fixed income, currencies and commodities (FICC) income in the second quarter fell 22% from Q1, although most rivals had shown a drop of a quarter to a third.

Income from advisory business fell, which analysts said was disappointing given its investment in this area, but equities income rose in the second quarter.

BarCap accounted for 63% of group underlying profit — which rose 24% from a year ago to £3.7 billion.

Group earnings were helped by a 41% tumble in bad debt charges during the first-half to £1.8 billion.

But Barclays took a £1 billion charge to cover compensation for the mis-selling of insurance policies in Britain, which had been signalled previously.

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Published: 02 Aug 2011, 02:39 PM IST
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