Barclays reviews investment bank, more cuts expected

Fri Mar 14, 2014 9:49am EDT
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By Steve Slater

(Reuters) - Barclays (BARC.L: Quote) has launched the third review of its investment bank in as many years, and is likely to cut more jobs and business areas as it battles to improve profitability, people familiar with the matter said.

The review, already underway, will be completed by the summer. It will aim to cut costs and focus on whether the London-based bank should pull back harder in areas of fixed-income trading that use a lot of capital and have recently offered poor returns, the people said on condition of anonymity.

While investment banks across the world are struggling with tougher regulations and low interest rates, Barclays has faced particular problems after its business culture was singled out for criticism by British regulators and it was one of the banks fined for manipulating Libor benchmark interest rates.

New Chief Executive Antony Jenkins has pledged to improve both the bank's image and performance, but faces a tough task as the investment bank contributes almost half of group earnings.

Last month, he prompted an angry reaction from shareholders and the media by announcing a 10 percent hike in bonus payments for last year to 2.4 billion pounds ($4 billion), despite a one-third fall in group pretax profits.

Critics say Jenkins needs to get greater control over costs, especially after he said in a newspaper interview he had been forced to raise pay for investment bankers in the United States to prevent a "death spiral" at the division.

"He's being forced into this partly by the economics (of low interest rates) and by the regulatory handcuffs. But this review is important for shareholders as it's a chance for Jenkins to say this is my final decision on the investment bank," said Simon Maughan, head of research at OTAS Technologies.

Jenkins said last month he expected to cut 12,000 jobs across the bank this year, which fuelled speculation of several hundred or thousands of job losses among the investment bank's 26,000 staff.   Continued...

A man walks past a rental bicycle sponsored by Barclays in London July 30, 2013. REUTERS/Toby Melville