New Delhi

Barclays is reportedly contemplating a sweeping overhaul that could yield savings of up to £1 billion ($1.25 billion) to enhance profitability. According to Reuters, this initiative may involve shedding as many as 2,000 jobs, primarily in the bank's back office.

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Leadership's review and focus

Barclays' top management, led by Chief Executive C.S. Venkatakrishnan, is actively reviewing proposals to bolster the bank's overall financial health. The proposed job cuts, ranging from 1,500 to 2,000 positions, could significantly impact Barclays Execution Services ('BX'), the bank's support function created in 2017 to streamline operations for its primary business divisions.

Targeted division and rationale

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The potential cuts are expected to be concentrated within BX, with an emphasis on cost reduction. This division was designed to eliminate redundancy and implement post-crisis risk management rules. The contemplated savings contribute to Barclays' overarching goal of reducing expenses by $1.25 billion across the group over several years.

Financial impact

Barclays' cost-cutting target represents approximately 7% of its underlying annual operating expenses, which stood at $16.3 billion in 2022. The bank has previously tried to trim expenses by cutting bonuses and jobs in various sectors, but the focus on BX and the associated potential savings has not been reported until now.

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Ongoing discussions and alternatives

The discussions regarding BX's headcount are ongoing, and the bank may opt to prioritize layoffs in other areas. BX's staff count has grown significantly in recent years, reaching about 22,300 by the end of 2022, constituting over a quarter of Barclays' total workforce. Staff costs at BX have also risen to $2.1 billion from $1.9 billion.

Venkat, who took over as CEO in November 2021, is under pressure to enhance Barclays' declining book value. The bank's share price has fallen by 26% since Venkat assumed leadership, in contrast to Deutsche Bank's stable shares and HSBC's 37% gain. Venkat faces challenges stemming from a trading blunder that cost the bank hundreds of millions of dollars and a talent exodus hindering Barclays' competitiveness in the investment banking sector.

Barclays aims to unveil a fresh strategy in February, and Venkat has hinted at further restructuring efforts. The bank is working with Boston Consulting Group on a comprehensive strategy review, assessing which parts of the business to invest in and which to potentially reduce or sell.

Bottomline

As Barclays navigates a complex financial landscape, the upcoming strategy presentation in February will be crucial in convincing shareholders of its plan to boost valuation and navigate industry challenges. The bank's potential cost-saving measures and job cuts reflect its need to adapt to evolving market dynamics and ensure sustained competitiveness in the global banking arena.