Barclays PLC bank suffered substantial losses in its investment banking return. Despite positive signs in retail and business banking, the investment drop caused a 4.4% drop in the company’s share price. On Thursday, Barclays PLC has scheduled an internal review which is expected to announce job losses and cuts. Bloomberg reports that company will initially cut around 7,000 positions from its investment bank. By 2016, however, Barclays will increase the number of positions cut by almost 20,000.
The current CEO of Barclays PLC is Anthony Jenkins, who took over the position from former CEO Robert Diamond in 2012. Diamond was accused of damaging the company by over-budgeting within the investment bank and was caught in a market-fixing scandal that cost him his job. Jenkins has now been in charge of, essentially, cleaning up Diamond’s mess. In 2013, Jenkins began rolling out plans to turn Barclay’s decline around. An independent report of the company’s practices declared the bank had an air of entitlement, a lack of transparency, and “warped pay levels.” Additionally, Jenkins states that the bank is structurally inflated and costs need to be cut. Earlier, Barclays PLC announced it would aim to cut 10-12,000 positions but has since increased that number to 20,000.
Robert Diamond, the former CEO of Barclays, had sought to create a “global universal bank.” Jenkins is aiming to distance himself from Diamond’s strategy by creating a “non-core,” “bad-bank” unit that will oversee the investment bank’s less favorable units. Jenkins is charged with the task of returning investments to shareholders. Part of that task will include closing low-traffic banking centers as more consumers access their accounts online. The new “bad bank” will hold approximately $1 billion dollars of under-performing Barclays PLC assets, primarily within the European market.
Anthony Jenkins believes that a multinational decline in investment banking will be a trend that continues for a while. The downward trend has prompted other banks, such as USBN, to scale back on costs. Part of Jenkins’ plan is to cut investment banking’s share of Barclay’s assets from around 50% to around 30%. An analyst told Bloomberg that despite the firm’s level-headed restructuring decisions, Barclays is still expected to suffer losses over the next year. The analyst states that it is impossible to have such an intense overhaul, with tens of thousands of positions being cut, without a few bumps.
Barclays has cycled through several CEOs over the last five years. In 2009, then Chief Executive Officer John Varley predicted a drop in investment banking assets. Barclays has had difficulty regaining its foothold since the financial recession began and its losses have been coupled with a dependence on investment banking asset in an ever-changing world. Anthony Jenkins recently responded to the loss of three major players by calling it a “generational shift.” Jenkins is confident that Barclays will remain competitive in today’s banking world.
Despite a recent 4.4% drop in the company’s share price, Jenkins believes that cutting jobs, restructuring the company’s assets, and focusing on viable markets will bring Barclays LPC into the new market as strong and competitive as ever. For 20,000 people, however, Barclays LPC may no longer be the company they call home.
By: James Ryder