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Barclays to Start Cutting Jobs in Investment Banking

Written by Anton Murray Consulting on . Posted in Investment Banking News, News

Cathy Chan, Fox Hu and Richard Partington

Barclays Plc (BARC), the U.K.’s second-biggest lender by assets, will start cutting hundreds of jobs across its investment bank this week, according to people with knowledge of the matter.

About 100 jobs will go in Asia, and reductions will also be made at Barclays’s markets and investment-banking units in London and New York, said the people, who asked not to be identified because they weren’t authorized to speak publicly. The cuts in Asia-Pacific amount to about 5 percent of the lender’s investment-bank in the region, one of the people said.

The eliminations are part of the 7,000 jobs Chief Executive Officer Antony Jenkins said the bank will cut by 2016. Jenkins is trying to revive profitability by cutting costs and targeting fewer clients amid a decline in income from trading fixed income, currencies and commodities — traditionally Barclays’s biggest source of revenue.

“When they think about cost cutting in investment banking they really think about head-cutting,” Sandy Chen, a banking analyst at Cenkos Securities Plc (CNKS) in London, said by telephone. “The problem is when you cut heads you cut the associated revenues with that head in investment banking. The strategic challenge they have is really how to cut the costs without cutting off the associated revenue.”

Barclays fell 0.8 percent to 244.1 pence in Londontrading for a market value of about 40 billion pounds ($67 billion). The shares have fallen 10 percent this year, making Barclays Britain’s worst-performing bank stock in the period.

‘In Line’

The 7,000 “reductions are in line with our commitment to a higher returning investment bank with an origination-led banking strategy and a markets business focused on standardized, liquid products,” the London-based lender said in an e-mailed statement.

The reductions follow a series of senior departures from the bank including Robert Morrice, Asia-Pacific chairman and chief executive officer, Hugh “Skip” McGee, CEO of the Americas division, and Larry Wieseneck, co-head of securities.

“Job cuts in Asia will continue,” Louis Wong, a Hong Kong-based fund manager at Phillip Capital Management, said by phone today. “Banks in Asia are experiencing slower growth in emerging markets and cost-cutting is one major way to boost their return on equity, similar to what the global banks have done in matured markets.”

Barclays will name Vanessa Koo to replace Edward King as Asia-Pacific head of mergers and acquisitions, one of the people said. Wu Sheng will be appointed to lead Barclays’s Greater China coverage, the person said. Koo and Wu both declined to comment.

‘Targeting Growth’

“We are not exiting any of the 11 countries we currently operate in throughout the region,” said Timothy Cuffe, a spokesman for the bank in Hong Kong. “We will target growth in key areas of strength and scale for the bank.”

Besides Morrice, senior departures in recent weeks from Barclays include Johan Leven, the Asia-Pacific head of corporate finance, people with knowledge of the matter said last week. Helge Weiner-Trapness, head of the Asia-Pacific financial institutions group, is also leaving, two people with knowledge of the matter said. Matthew Ginsburg is stepping down as head of investment banking for the region, the bank said May 15.

Barclays started M&A advisory operations in Asia in 2008 and began offering equity underwriting the following year. It then started building its investment-banking franchise and cash equities business in 2010 as part of a global expansion following the acquisition of Lehman Brothers Holdings Inc.’s U.S. operations.

‘Fees Shrink’

Fees for underwriting equities and bonds, as well as advising on takeovers, shrank 23 percent for banks in the Asia-Pacific region from the beginning of 2011 through the end of 2013, according to New York-based research firm Freeman & Co. Such fees rose 23 percent in the U.S. in the same period and fell 6 percent in Europe, the data show.

Globally, Barclays has been mired in scandals from interest-rate rigging to selling insurance that clients didn’t need. The bank is now cutting jobs, rebuilding relations with regulators and responding to shareholder pressure to curb bonuses.

Bloomberg