Jenkins slashes jobs and pay to shore up profit

Tim Wallace
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BARCLAYS shares soared as the bank announced a major cost-cutting plan yesterday, shutting four business units and shaking up another 32 of its 75 units to streamline the institution and shore up profits in the face of a weak economic outlook.

Chief executive Antony Jenkins announced 3,700 job cuts – well above the 2,000 expected – as part of a drive to save £1.7bn per year. Most of those will come in the weak European business and Asian equities arm that the bank is cutting back, though hundreds of cuts could come in the UK.

And the bank cut its bonus pool by 14 per cent on the year to £1.85bn.

In a bid to improve Barclays’ public image, he will be gradually shutting down all activities designed purely to cut customers’ tax bills, as well as agricultural commodities trading, even though these units bring in £500m of revenue per year.

Jenkins pledged to increase return on equity so that is it above the cost of equity by 2015. Currently it stands at 7.2 per cent, well below the 11.5 per cent cost. He expects much of that to come from profitable and high growth units including Barclaycard, UK mortgages and African activities.

He also vowed to increase the common equity tier one ratio to 10.5 per cent and raise dividends. The bank’s full year results showed a 96 per cent fall in pre-tax profits to £246m, though an own credit charge of £4.58bn, PPI provisions of £1.6bn and interest rate swap provisions of £850m account for much of that drop. On an underlying basis, unadjusted profits rose 26 per cent to £7.05bn.

Shares jumped 8.57 per cent.