Barclays’ big strategy day next February is starting to look anticlimactic. There won’t be any big pullbacks from entire business areas (equities) and there won’t be thousands upon thousands of redundancies. There will instead, it seems, be a little light trimming around the edges.
One senior Barclays banker told us there will be no ‘material changes’ in business areas where Barclays is comparatively weak (ie. cash equities, Asian equities and IBD). Other insiders say that many of the cuts that need to take place have already happened. This follows reports last month that Barclays had made 30 redundancies in its European equities business – many of them in Continental European offices.
The Wall Street Journal reported today that ‘senior Barclays Executives’ are recommending that the investment bank only cuts 1,000 to 2,000 investment banking jobs. This is lower than the 3,500 job cuts suggested by Goldman analysts last week and good news in light of last month’s Financial Times suggestion that investors are calling for Barclays to pull out of equities entirely.
James Chappell, an analyst at Berenberg, said that if the Wall Street Journal’s redundancy figures are correct, they’re likely to be a disappointment to investors. “These are the minimum which the market is expecting, in our view,” Chappell said: “This has all the symptoms of a classic travel and arrive with disappointment on the day.”
If jobs at Barclays look safe, the same cannot necessarily be said for bonuses. Last year, the bonus pool at Barclays investment bank was around £1.6bn. This year, Ian Gordon, analyst at Investec, says compensation costs at the investment bank are likely to be reduced by £200m to cover the Libor-related fine and by another £100m to meet Barclays’ cost target in a difficult market. This implies a minimum 20% cut in bonuses at Barclays this year.
Any reduction in the bonus pool is likely to impact Barclays in London far more than in the US. The US investment banking job market remains more stable than in London and investment bankers in New York will need to be paid retention money. “We are going to need to pay more in regions where there is more demand for staff,” says the Barclays insider.