Barclays' boss treads fine line in investment bank review

Tue Apr 15, 2014 10:24am EDT
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By Steve Slater

LONDON (Reuters) - Barclays' (BARC.L: Quote) Chief Executive Antony Jenkins is facing a high-wire act to overhaul the firm's investment bank without undermining a division that contributes about half of group profits.

Jenkins, criticized by investors and politicians for raising bonuses this year despite a big fall in earnings, has embarked on the third review of the investment bank in as many years in response to pressure to cut costs and improve returns, which lag other parts of the business such as Barclaycard.

Analysts predict this might lead to a cut in the investment bank's size of up to 20 percent. This would equate to about 5,000 jobs going out of 26,000 and could strip out about 900 million pounds in annual compensation costs.

"The expectation is for something like a 10 to 20 percent cut (in size)," Chintan Joshi, analyst at Nomura, said.

"In the long-term they will have to do more. On a four or five year view, the investment bank could probably halve."

Despite his description of the investment bank as "an essential part" of Barclays, investors and analysts expect Jenkins, a retail banker, to pull out of areas where the bank lacks the scale to compete against Wall Street majors.

"We'd like it to be a smaller part of the bank overall," said David Moss, director of European equities at F&C Investments, which is one of the bank's top 40 shareholders.

"The problem at the moment is it dominates too much. Not only from a capital and product point of view, but also from a sentiment point of view ... everyone spends all their time focusing on the investment bank and not saying what a great business Barclaycard is," Moss said.   Continued...

Antony Jenkins, group chief executive of Barclays PLC, speaks during the Clinton Global Initiative (CGI) in New York September 26, 2013. REUTERS/Lucas Jackson