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It was Barclays’ earnings day and the announcement of Coimbatore CEO Sundararajan Venkatakrishnan’s new strategy, and to some extent, as expected, Venkat’s strategy includes significant cost savings. include. Similarly, as expected, much of the cost savings will come from corporate investment banks (CIBs), but we expect some growth there as well.
In today’s results presentation, Barclays outlined its intention to cut costs by £2bn between 2024 and 2026, of which £700m will come from corporate and investment banks. Of the £2 billion, £340 million will come from redundancies, and of the £340 million, £188 million will come from redundancies, particularly in the CIB.
There will be more layoffs.
It doesn’t help that Barclays’ investment bank underperformed in 2023. Pre-tax profit was down 9% on 2022 to £3.2bn. Expenses consumed 70% of revenues, and CIB’s target return on capital was only 7%. Market revenue has declined from its peak in 2022, falling 26% year over year in the final quarter. Barclays said this was also due to its product mix. 2023 was a bad year for macro trading, but it was a good year for securitization trading, and macro is where Barclays is strong.
Who will lose their jobs? Although Barclays has not said so, it believes traders in capital-hungry market roles are most at risk as Barclays seeks to reduce the capital intensity of its investment banks. Investment bankers look safe by comparison. Barclays wants to grow in equity capital markets (ECM) and advisory, and like UBS, it has some areas of strength (technology, healthcare and energy transition). However, the company will not be hiring in these areas in 2024, but intends to “monetize upfront investments in talent and technology.”
In the market, banks have several focus areas. It wants to grow in European rates, equity derivatives and securitized products and believes it could generate around £500m of additional revenue here by 2026. Jobs in these markets should be protected.
The presentation is also good. This comes after suggestions that Mr. Venkat was planning to impose an unattainable return on equity target of 14% to 15% on the investment bank, which would almost certainly mean major job cuts. Today’s presentation revealed that this target has been lowered to a much more manageable 12%. %.
Photo by Nemesia Production on Unsplash
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