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Barclays' £2bn cost-cutting program will hit people in the investment bank hardest

It's Barclays' results day and the unveiling of the new strategy of CEO Coimbatore Sundararajan Venkatakrishnan, and somewhat predictably Venkat's strategy involves a lot of cost-cutting. Equally, predictably, much of that cost-cutting will come from the corporate and investment bank (CIB), although there is some growth thrown in there too. 

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In today's results presentation, Barclays explains its intention of cutting £2bn in costs between 2024 and 2026, of which £0.7bn will come from the corporate and investment bank. £340m of the £2bn will come from cutting headcount, and £188m of the £340m will come from cutting people in the CIB in particular. 

More layoffs are coming. Bonuses are down. 

It doesn't help that Barclays' investment bank had a weak 2023. Profit before tax fell 9% versus 2022 to £3.2bn; costs consumed 70% of revenues and the return on tangible equity in the CIB was only 7%. Markets revenues fell from their peak of 2022 and were down 26% year-on-year in the final quarter. Barclays said this was partly by virtue of its product mix: 2023 was a bad year for macro trading but a good year for securitization trading, and macro is where Barclays is strong.

Who will lose their jobs? Barclays doesn't say, but traders in capital hungry markets roles look most at risk as Barclays seeks to reduce the investment bank's capital intensity. By comparison, investment bankers look safe. Barclays wants to grow in equity capital markets (ECM) and advisory and, like UBS, it has some favourite sectors (tech, healthcare, energy transition). However, it won't be hiring in these areas in 2024 but intends to "monetise prior investments in people and technology."

In markets, the bank has a few focus areas: it wants to grow in European rates, equity derivatives, and securitized products and thinks it can earn an additional c.£0.5bn of income here by 2026. These markets jobs should be protected. 

There's some good in the presentation too. Following suggestions that Venkat planned to impose an unattainable 14%-15% return on equity target on the investment bank, which would almost certainly have meant some really big job cuts, today's presentation reveals that this target has been cut to a far more manageable 12%. 

 Photo by Nemesia Production on Unsplash

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AUTHORSarah Butcher Global Editor

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