Barclays to axe hundreds of investment banking jobs in multi-year profit push

The report added that the job cuts will affect the workforce in global markets, research, and the firm’s investment banking arm. The cuts are anticipated in the coming months and are part of the firm’s annual cutting of low-performing employees, as quoted by Bloomberg.

“We regularly review our talent pool to ensure that we can invest in high-performing talent, execute on our strategy, and deliver for our clients,” Barclays said in an emailed statement, as quoted by Bloomberg. “However, there are no finalised numbers for this year’s review.”

In recent months, Wall Street giants, from Citigroup Inc. to JPMorgan Chase & Co., have turned to job cuts in response to the global slump in dealmaking and capital markets activity. At Barclays, the moves come as the company is kicking off a lengthy push to improve the profitability of its investment bank division, which has been stung by that dearth of activity as well as higher-than-usual attrition among dealmakers.

For a while now, investors have raised concerns with Barclays regarding the sustainability of its Wall Street operations. This is primarily due to the investment bank utilising more capital compared to other divisions within the firm that yield higher returns. Last month, Chief Executive Officer C S Venkatakrishnan aimed to address these concerns by outlining strategies for the unit to enhance profitability. This includes a focus on strengthening its advisory services and equity underwriting offerings.

As part of that work, the company has been refocusing its businesses on industries it believes will be most active in the coming years, including financial sponsors and energy companies that are navigating away from greenhouse gas emissions. To that end, Barclays won a mandate to advise Equitrans Midstream Corp. on its $5.5 billion sale to the US natural gas producer EQT Corp. this month.

At the same time, though, the company has vowed to invest more heavily in other areas within the bank, including its UK-focused offerings and its US credit card arm. For instance, Barclays expects risk-weighted assets to climb by roughly £50 billion ($64 billion) in the coming years, and it is not planning to allocate any of the additional capital to the investment bank.

Managers in the division are also under pressure to trim £700 million in costs by 2026 as they seek to reduce the unit’s cost-to-income ratio to a percentage in the high 50s. This metric, which shows how much it costs to generate a pound of revenue, ended last year at 69%.

“The simple way to think about it is that we’re looking for the investment bank to grow and to contribute more while consuming less,” Venkatakrishnan said at the event last month.

Bankers on Edge

Inside the investment bank division, employees have been on edge for months as they awaited executives’ decisions on the fate of the unit, as reported by Bloomberg late last year.

The division has been reeling from a difficult bonus season in which Barclays handed dozens of investment bankers no bonus at all. Tensions have also been running high as executives have spent recent months trying to recover from the period of higher-than-usual attrition last year.

After those departures, the division’s leaders — Cathal Deasy and Taylor Wright — began offering guaranteed bonuses and paying more to those who threatened to leave, as reported by Bloomberg last month. These moves further depleted the bonus pool this year, frustrating bankers who stayed, according to people familiar with the matter at the time.

“The investment bank is a critical part of Barclays and will continue to be an important part of Barclays,” Venkatakrishnan said last month, as quoted by Bloomberg. “I’m equally clear that there is a lot more to do. Our investment bank has to be higher returning. And, relatively speaking, it has to become a smaller part of Barclays.”

Milestone Alert!
Livemint tops charts as the fastest growing news website in the world 🌏 Click here to know more.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it’s all here, just a click away! Login Now!

Published: 21 Mar 2024, 08:29 AM IST