[ 2014-02-09 ]

Barclays takes £150bn axe to casino bank
BARCLAYS is to slash the size of its investment
bank by a fifth as part of its efforts to win back
the trust of the Bank of England.

Thousands of jobs are at risk under the plan to
sell off £150bn of loans and toxic securities and
reduce annual costs by £1.7bn. The cuts are
expected when chief executive Antony Jenkins
reveals annual results on Tuesday.

The figures will again stoke the debate on
bankers’ pay. Barclays will post profits of
about £5.5bn, down nearly a third on last year,
and pay bonuses of about £2.4bn, an increase of
about 10%.

The pay furore is likely to be heightened with a
draft report on banking ethics and standards due
tomorrow from Sir Richard Lambert, the former
director-general of the CBI.

Barclays has been at the vanguard of a group of
banks that are exploiting a loophole in the EU’s
new cap on bonuses to continue paying sky-high
sums to investment bankers — a scheme now under
investigation by officials from Brussels.

In response to new capital rules and pressure from
investors to boost shareholder returns, Jenkins
will reveal plans to shrink the investment bank
substantially. At the time he announced a £5.8bn
rights issue last summer, he said the investment
bank’s balance sheet would be cut by between
£65bn and £80bn. That target is expected to be
doubled this week, taking the total to about
£150bn.

Until the Bank of England started to put pressure
on Barclays over its capital levels, Jenkins had
been reluctant to cut back the investment bank,
which is roughly the same size as it was before
the financial crisis began. Regulators now require
it to hold 10 times as much capital against those
operations, however, which has crushed its
profitability.

The investment bank will still account for about
half of group profits, but it is generating a poor
return for investors relative to the huge sums of
cash it employs.

Jenkins has already said he could slash the
bank’s exposure to derivatives by up to £35bn,
trim £25bn from the amount it lends in the
securities markets and cut £20bn by changing the
type of assets it holds in emergency reserves.

The new target is expected to see Barclays pull
out of several business lines altogether. It is
likely to withdraw from areas of the financial
markets where it does not have a dominant
position.

Barclays’ costs increased last year, in spite of
pledges to tighten its belt. A lot of the rise can
be traced back to George Osborne’s decision to
increase the bank levy — a tax on their balance
sheets.

It is understood the bank has already warned that
up to 400 highly paid investment bankers face the
axe. Another 1,700 jobs are going from the retail
bank.

Lloyds Banking Group’s results are also due out
this week, and they are expected to show it has
crept back into the black. Lloyds is expected to
pay bonuses of about £400m — up from £360m
last year.

Antonio Horta-Osorio, the chief executive, is
believed to be in line for a bonus of about
£1.5m.

■ Minutes from a Bank of England meeting in
April 2012 suggest that traders told Bank
officials how they shared information with one
another to set international exchange rates.
Regulators around the world are now probing more
than 12 big banks over claims that they colluded
to rig the market.

Source - The Times(UK)

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