Barclays has started to cut jobs in its Asian investment bank division as part of the UK lender’s restructuring plan set to be unveiled by chief executive Antony Jenkins next month.
The lay-offs are taking place in its global finance and risk solutions division, which contains equity and debt capital markets, and its M&A business. They will amount to 15% of investment banking staff in Asia-Pacific, or at least 70 people, according to unofficial sources. The final number could be higher, but a Barclays spokesperson could not confirm the figures.
The process apparently began yesterday, but those affected are unlikely to include many high-profile names. However, some reports suggest that at least two Hong Kong-based managing directors have lost their jobs.
Barclays went on a hiring spree in the region in the wake of the 2008 crisis with the intention of lifting its investment banking business into the top league.
That strategy had shown signs of success. Barclays has risen in the M&A rankings by deal value and has been especially prominent as a leading bookrunner for Asian bond issues, according to Dealogic.
The cutbacks follow similar moves by other banks announced at the beginning of the year. Ten days ago Morgan Stanley said it would sack 50 investment bankers in the region as part of the 1,600 job cuts it will be making worldwide across its institutional securities group.
Citi, Credit Suisse, Deutsche Bank and UBS have made similar moves as part of a widespread retrenchment within the industry in response to lower revenues and tighter regulatory regimes.
The reductions at Barclays are also likely to be part of a global cull. Some investment banking jobs in Europe were eliminated in December, according to reports. Total job cuts worldwide could amount to 3,500 out of the bank’s 23,000 staff.
Barclays’ Jenkins, who replaced Bob Diamond as CEO last August after the Libor rate-fixing scandal, intends to outline his strategic plan for the bank on February 12. Cost savings are likely to form a significant part of that plan, as investment banking revenue has fallen throughout the industry, whether from M&A advisory fees or equity underwriting.
Citi analysts expect Jenkins to produce a three-point scheme next month. According to a January 4 paper, they say he will focus on achieving sustainable returns above the cost of equity in each division, “non-performance” cost savings and continuous discipline on “performance” costs, as well as confirmation of a progressive dividend policy and a target 10.5% Basel 3 core tier-1 ratio by end-2014.
In addition, Citi analysts reckon that Jenkins will emphasise that the investment bank will need to be “fine-tuned”, with more concentration on business practices, costs, compensation and on more efficient balance sheet utilisation.
They pointed out that Barclays has already reduced variable compensation and identified $3.2 billion of cost-savings, but has room to make $2.4 billion more. On the other hand, significant revenue gains could be made from the investment banking division pushing further into emerging markets.