For banks, controlling costs through job cuts has become one of the most preferred ways of sustaining profitability. In sync with this strategy, Barclays PLC BCS plans to cut further jobs. The news was first reported by Bloomberg.
According to persons familiar with the matter, the London-based bank intends to cut 20% additional workforce at its investment banking division as losses in Asia and global cash equities operations continue to hurt its profitability. Barclays’ Asia securities business, operating in markets such as Japan, Hong Kong and Singapore, has become less profitable.
Therefore, Barclays seeks to axe more employees (this is separate from its current plan to trim 7,000 jobs at investment banking division by 2016). The latest announcement is expected to go official by early next year. As of Dec 31, 2014, the company employed 20,500 people at its securities unit.
At present, Barclays is on track to reduce 19,000 jobs through 2016 as part of its global cost-reduction plan. Further, the company restructured its entire business and created a ‘Bad Bank’ as well (read more: Barclays to Slash 14K Jobs, Create 'Bad Bank').
Additionally, all these initiatives by Barclays have started to bear fruits, as evident from a continued decline in operating expenses. The company is also exiting from less profitable countries, by selling its consumer banking businesses in Portugal, Italy and Spain. Further, the company’s French business is on the block for divestiture.
We believe that Barclays, despite balancing the increasing litigations and settlements with cost-saving initiatives as well as restructuring efforts, needs to improve its revenues, costs and capital performance for boosting its financial performance, going forward. So the company’s plan to cut additional jobs is consistent with its long-term growth strategy.
Of late, many global banks are resorting to job cuts at less profitable units in order to focus more on profitable areas. In the last couple of months, Deutsche Bank AG DB, Standard Chartered plc SCBFF and Credit Suisse Group AG CS announced substantial job cuts amid a continued decline in profits.
Currently, Barclays carries a Zacks Rank #3 (Hold).
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