* Review to be done by summer, sources say
* Barclays has already announced 12,000 job cuts for group
* Shareholders angry about bonuses and costs
* Shares fall 2.7 pct to 15-month low
By Steve Slater
March 13 Barclays has launched the
third review of its investment bank in as many years, and is
likely to cut more jobs and business areas as it battles to
improve profitability, people familiar with the matter said.
The review, already underway, will be completed by the
summer. It will aim to cut costs and focus on whether the
London-based bank should pull back harder in areas of
fixed-income trading that use a lot of capital and have recently
offered poor returns, the people said on condition of anonymity.
While investment banks across the world are struggling with
tougher regulations and low interest rates, Barclays has faced
particular problems after its business culture was singled out
for criticism by British regulators and it was one of the banks
fined for manipulating Libor benchmark interest rates.
New Chief Executive Antony Jenkins has pledged to improve
both the bank's image and performance, but faces a tough task as
the investment bank contributes almost half of group earnings.
Last month, he prompted an angry reaction from shareholders
and the media by announcing a 10 percent hike in bonus payments
for last year to 2.4 billion pounds ($4 billion), despite a
one-third fall in group pretax profits.
Critics say Jenkins needs to get greater control over costs,
especially after he said in a newspaper interview he had been
forced to raise pay for investment bankers in the United States
to prevent a "death spiral" at the division.
"He's being forced into this partly by the economics (of low
interest rates) and by the regulatory handcuffs. But this review
is important for shareholders as it's a chance for Jenkins to
say this is my final decision on the investment bank," said
Simon Maughan, head of research at OTAS Technologies.
Jenkins said last month he expected to cut 12,000 jobs
across the bank this year, which fuelled speculation of several
hundred or thousands of job losses among the investment bank's
The bank cut 7,650 jobs last year, including 1,400 in the
investment bank, where it shed a further 400 staff last month,
including many managing directors.
The Financial Times said the bank could oust the co-heads of
the investment bank, Tom King and Eric Bommensath.
A spokesman for Barclays said there were no plans for any
change in leadership at the investment bank. The bank declined
Barclays shares climbed in early Friday trading but were
down 2.7 percent to 229.5 pence by 1225 GMT, their lowest for 15
months. The drop was in line with Europe's bank index.
Jenkins has repeatedly said he would keep a significant
sized investment bank. However, previous reviews have yet to
Return on equity - a measure of how well a company uses
shareholder funds to generate a profit - fell to 8.2 percent at
the investment bank last year from 12.7 percent in 2012.
That was also below the bank's 10.5 percent cost of capital,
which includes interest payments and dividend obligations.
Tougher regulations and weak trading in fixed income, which
generates most of the investment bank's profits, are putting
ever greater pressure on returns.
The bank was forced to improve its leverage ratio last year,
which also influences the future size of the investment bank.
Revenues in fixed income, especially interest rate trading,
have remained weak this year, extending a slump seen since May,
blamed on tougher regulation and a move by the U.S. central bank
to put the brakes on its bond-buying programme.
Deutsche Bank on Thursday said it had had a
"slow" start to the year, following similar warnings from
Citigroup and JPMorgan.
Revenues at Barclays' investment bank in the first quarter
are expected to fall 16 percent from a strong year-ago period,
dragged down by a 30 percent tumble in fixed-income revenues,
Investec analyst Ian Gordon estimates.
Revenues from its equities and advisory businesses are
expected to rise, so Jenkins could opt to shrink fixed income
operations and allocate capital to equities or advisory units,
or into other areas of commercial banking.
Analysts said cost cuts are likely to be needed to drive
improvement in profitability at the investment bank, after
compensation rose to 43.2 percent of income last year from 39.6
percent in 2012, and above Jenkins' target of mid-30s.
The row over pay has put Barclays on a collision course with
investors, some of whom are threatening to vote against the
bank's remuneration plan at its annual shareholder meeting next
month. Jenkins is meeting investors to explain the reasoning and
his long-term vision for the investment bank.
Barclays' head of equities for Asia Pacific Nick Wright is
leaving the bank, sources said on Friday, adding he was leaving