It's a day for big numbers. Firstly, City AM suggested that previous reports regarding Morgan Stanley's fixed income layoffs were understated and that the US bank's not planning to get rid of 25%, but 40% of its fixed income staff. Secondly, we've run a few calculations of our own and come to the conclusion that Barclays may be preparing to dispense with 30% of its equities sales and trading staff.
Our revelation follows last week's Bloomberg report that Barclays is 'mulling' making an additional 20% of its staff redundant. Bloomberg said the putative new cuts will fall in Asia and the global cash equities business. If the 20% figure is to be reached, it looks like headcount in both areas will suffer horribly.
Barclays doesn't break out the location of its investment banking employees. The most recent figures released by the bank simply state that it employed 20,500 people at the end of 2014. However, Chirantan Barua banking analyst at Bernstein Research, produced his own breakdown of the distribution of Barclays employees by geography and business in April last year.
Barua's chart looked like this:
In other words, in mid-2014, Barua said Barclays had 26,200 staff, of whom 9,000 were in the US, 16,800 were in Europe and just 400 were in Asia.
It's not clear how Barclays 20,500 current staff are distributed (and whether things have evolved to look like the second chart), but if Barua was right, one thing is certain: Barclays doesn't have many staff in Asia anyway.
Barclays didn't respond to a call on its alleged new redundancies. However, if the bank increases its 7,000 person redundancy program by 20%, the implication is that another 1,400 people will go. Even if everyone at Barclays in Asia is cut, it looks like the bulk of the new redundancies will come from cash equities, where global headcount doesn't look to be much higher than 3,000.
It makes good sense for Barclays to cut costs and headcount in its equities business. As we reported in October, the British bank has been seriously under-performing its peers in equities sales and trading. Initially this underperformance could be attributed to the fallout from Barclays' dark pool scandal in 2014, but the longer it persists the more it seems to be endemic.
Chris Wheeler, banking analyst at Atlantic Equities, says Barclays spent big money on big equities hires after acquiring Lehman's European equities operations in 2008. It now needs to trim those costs back to a manageable level. "Cash equities has been a decent business for Barclays, but it's possible that the cost base is too high for the size of their market," Wheeler told us.
In the meantime, last week's report that new CEO Jes Staley approached his ex-J.P. Morgan colleague Blythe Masters to become CEO of the investment bank has raised questions about Barclays' leadership.
Masters reportedly resisted Staley's offer, but the mere fact of its existence suggests Tom King's days as head of Barclays investment bank are numbered.
This is ironic, given that it was King who precipitated the departure of former Barclays' CEO Antony Jenkins. King reportedly threatened to resign unless Jenkins went. Now, it looks like he'll be departing too.
Curiously, it also looks like the leadership of Barclays' investment bank is being re-fashioned around fixed income sales and trading. King is an M&A and IBD man, but Staley's approach to Masters suggests he'd rather the bank were run by a trading professional. Mike Bagguley, who was promoted to chief operating officer at the investment bank last month, also has a fixed income trading background.
In fact, Wheeler says the resurgence of fixed income traders in senior positions at Barclays might have more to do with a shortage of senior talent than anything else: "They need experienced management and after all the culling there's simply not that much of it around."
He also suggests that Barclays needs to promptly clarify who's in charge of the investment bank: "If they don't settle this soon, they won't have much of an investment bank left. People are going to leave." If so, maybe Barclays can make up its additional 1,400 job cuts with voluntary redundancies?