* Review to be done by summer, sources say
* FT predicts job cuts, management changes
* Shareholders unhappy about remuneration
By Steve Slater
March 13 Barclays is reviewing the size
and shape of its investment bank, in a review that is expected
to result in it shrinking and focusing on its most profitable
areas, two people familiar with the matter said on Thursday.
The review - which will focus on whether the London-based
bank should exit business that is balance sheet heavy and
low-return - is already under way and will be completed by
summer, sources said.
The Financial Times said the review could result in
thousands of job cuts and the possible departure of 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 in the investment bank. The bank declined
The shake-up comes after an angry reaction from shareholders
to news last month that Barclays had increased bonus payments by
10 percent last year to 2.4 billion pounds ($4 billion), despite
of a one-third fall in its pre-tax profits.
Critics said Chief Executive Antony Jenkins needed to get
greater control over costs in his investment bank, especially
after he said in a newspaper interview that he had been forced
to raise pay for investment bankers in the United States to
prevent a "death spiral" at the bank.
The aim of the investment bank review will be to improve
profitability, the source said. The division last year generated
a return on equity of 8.2 per cent - below its cost of capital -
while its ratio of costs to income increased from 39.6 to 43.2
Tougher regulations and weak trading in fixed income, which
generates most of the profits at Barclays' investment bank, 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.
Fixed income revenues have remained under pressure this year
after a slump in the second half of last year, with Deutsche
Bank on Thursday saying it had had a "slow" start to
the year, following similar warnings from Citigroup and
That means any improvement in profitability is likely to
have to come from cost cuts.
Other banks are shrinking their fixed income operations and
allocating capital to equities or advisory units, or into other
areas of commercial banking.
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.
Jenkins has repeatedly said he will keep a significant sized
investment bank, which contributes about half of group earnings.