LONDON (Alliance News) - Barclays PLC Thursday detailed plans to shrink its investment bank with a new round of job cuts, while shifting billions of pounds' worth of risk-weighted assets into what it termed a non-core unit, amidst changes to the group's overall structure to boost returns.
In a statement, the UK-based lender said it will cut around 7,000 jobs in its investment bank by 2016, with the unit to be shrunk to make sure it makes up just 30% of the group's total risk-weighted assets by 2016. In its current state, the investment bank makes up just over half of the group's risk-weighted assets. The revamped unit will be "origination led and returns focused" and will offer banking, equities, credit and certain macro products in a more capital-efficient way, Barclays said.
The changes to the investment bank are at the heart of an overall business reorganisation that will result in the group being split into four core businesses - personal and corporate banking, Barclaycard, Africa Banking, and the investment bank - as well as a "non-core" entity which will include assets that either don't fit with Barclays' strategy or with its targeted returns.
The non-core unit, often called a "bad bank", will be made up of about GBP115.00 billion of risk-weighted assets. Around GBP90.00 billion of that figure will be allocated from the investment bank and will include non-standard derivatives from the bank's fixed income, currencies and commodities business, as well as certain commodities and "specific" emerging markets products.
On top of that, the entirety of Barclays' European retail business will be included in the non-core unit, as well as about GBP9.00 billion of risk-weighted assets from the existing corporate, Barclaycard and wealth management units.
Barclays Chief Executive Antony Jenkins said in a television interview that options for the European retail bank include an initial public offering or a sale, while maintaining that the non-core unit is not about bad assets but ones that are non-strategic in nature.
The revamp comes amidst pressure on Jenkins to boost returns across the group, which have been hurt by a decline in the investment bank's FICC business, for which on Tuesday Barclays reported a 41% decline in first-quarter income. Increasingly stringent regulation on the capital that all banks must hold to withstand losses, along with the US Federal Reserve's quantitative easing measures, have contributed to an industry-wide decline in FICC, leading to questions about whether the slump is merely cyclical or also extends to a structural problem.
Barclays said it expects to incur a further GBP800.0 million in costs on top of the GBP2.7 billion announced under a strategy update in February 2013.
"This is a bold simplification of Barclays. We will be a focused international bank, operating only in areas where we have capability, scale and competitive advantage," Jenkins said in a statement.
"In the future, Barclays will be leaner, stronger, much better balanced and well positioned to deliver lower volatility, higher returns, and growth," Jenkins added.
Barclays shares were Thursday quoted at 252.90 pence, up 4.0%, putting them top of the FTSE 100.