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 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.(http://link.reuters.com/nec67v)
A spokesman for Barclays said there were no plans for any change in
leadership in the investment bank. The bank declined further
comment.
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 per cent.
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.
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Fixed income revenues have remained under pressure this year after a
slump in the second half of last year, with Deutsche Bank <DBKGn.DE>
on Thursday saying it had had a "slow" start to the year, following
similar warnings from Citigroup <C.N> and JPMorgan <JPM.N> .
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.
($1 = 0.5997 British Pounds)
(Reporting by Steve Slater in London,
Soyoung Kim in New York, Tasim Zahid and Richa Naidu in Bangalore;
editing by Anthony Barker and Robin Pomeroy)
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