Any BarCap hiring now likely to predominantly be in Asia, back office set to shrink
BarCap's build out of its European equities and M&A business over the last two years is well-known, and the message to the new hires seems clear - it's time to deliver. It's still looking to recruit in Asia-Pacific, however.
Barclays wants to boost its revenues by 20% by 2013. According to Jerry Del Missier, BarCap's co-chief executive speaking at the group's investor seminar yesterday, the bank believes it can "deliver a further 2bn of income from equities and investment banking".
It expects much of this growth to come from the US and Europe "as the new hires we've made begin to generate revenues". Any more hiring in these divisions won't happen until performance improves, with Del Missier saying that investment in the next year will be "on a pay as you go basis".
A lack of new recruitment in Europe won't come as much of a surprise. Revenues at BarCap fell by 15% in the first quarter, and the lack of distinct improvement in equities and investment banking has been cause for concern.
According to one analyst during the bank's Q1 results conference call, the cost income ratio of those divisions is 90%. BarCap's recent trimming of 50 people in its equities sales and trading business indicates it's willing to weed out underperformers.
More promisingly, BarCap still has aspirations to build out its Asian presence. Headcount in its investment bank there has nearly doubled to 450 over the last two years, and it intends to hire in M&A, build out its equity capital markets function, focus more on China and increase its research capabilities.
Cutting costs in the back office
Barclays is aiming for "cost synergies" by the new closer relationship between its investment banking and corporate banking functions.
The result is that it's aiming to cut costs by 250-300m by 2013 through "eliminating duplication and integrating management, support functions and infrastructure wherever possible". It's also planning on moving back office functions to lower cost destinations.
In some ways this has already begun - let's not forget that the creation of 600 roles in Glasgow last year was part of a shared services initiative for its back office functions and meant many employees in London either relocated or left.
Expect more of this in the future.
