Barclays chief pledges there’s no going back to the old ways

BARCLAYS pledged a break with the past as its new chief executive unveiled a turnaround plan which aims to cut costs, change its culture and improve profits.

Scandal-hit banking giant Barclays today said it was axing at least 3,700 jobs under a 'strategic overhaul'.
Scandal-hit banking giant Barclays today said it was axing at least 3,700 jobs under a 'strategic overhaul'.

The bank is still reeling from last year’s £290m fine for rigging the London interbank offered rate, a new probe into its fundraising from Qatari investors at the height of the credit crunch, plus various mis-selling scandals.

But its former retail banking head turned chief executive, Antony Jenkins, said “there will be no going back to the old ways of doing things”.

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“There’s no choice between doing well financially and behaving well in this business,” he said. “We are changing the type of business we do and we are setting a new course for the future of Barclays.”

Mr Jenkins said 2012 was a tough year for the bank and the sector after it became “too aggressive, too focused on the short-term and too disconnected from the needs of customers and clients and wider society”.

He said under his stewardship Barclays aims to become the “go-to” bank.

“There are those who take the view that this is merely cyclical,” said Mr Jenkins in the incongruous setting of the Royal Horticultural Society’s London base.

“Their plan is to wait until the economy turns on the expectation that regulation and societal pressures will recede and then they can return to business as usual.

“They are wrong. This is a secular shift. It’s permanent and material. Those banks that fail to understand this shift will fall behind. There must be a new approach for the sector.”

Barclays revealed plans to pay its investment bankers an average bonus of £54,100 for 2012, down 17 per cent on last year. Bonuses at the bank will total £1.85bn, down 14 per cent on last year.

But a total £1.8bn bonus pool for 2012, including £852m of cash rewards, exceeds the £1.4bn paid in dividends during the year.

Mr Jenkins said cutting bonuses ”will take time”. “It’s not in our shareholders’ interests to radically reduce the amount of money we pay in variable compensation if it leads to talent leaving the organisation.” He said over time it will “normalise”.

Shares in the bank responded by surging 25.85p to 327.35p, closing up 8.6 per cent. The biggest riser in the FTSE 100, it also hauled up Lloyds and Royal Bank of Scotland, which rose 5.1 per cent and 4.1 per cent respectively.

Barclays is making £1.7bn of cost cuts, including 3,700 job cuts across its investment bank and European retail banking operations.

Its costs will be cut from £18.5bn in 2012 to £16.8bn in 2015. It plans to deliver a return on equity (ROE) – a key measure of bank profitability – which beats its cost of equity, currently around 11.5 per cent.

The bank is closing its structured capital markets (SCM) arm, which sets up complex tax arrangements for wealthy individuals and companies and has attracted criticism from MPs.

“Although this is legal, going forward this is incompatible with our purpose,” said Mr Jenkins.

He also said Barclays had stopped trading “soft” commodities “for speculative purposes” – after it made millions betting on wheat and soya prices. In total, four of its 75 units will close and another 17 are under review.

Instead, it plans to focus on the UK, US and Africa, while maintaining a big enough presence in Asia and Europe to maintain its investment banking arm.

Mr Jenkins insisted its BarCap investment banking arm will remain at the heart of Barclays, despite the Libor scandal, in which a string of damaging emails revealed how investment bankers sought to move Libor rates to profit on trades.

“The investment bank will remain a very large and important part of the group,” he said.

Barclays reported adjusted pre-tax profits of £7bn for 2012, up 26 per cent on a year ago.

But on a statutory basis, once a credit charge and mis-selling provisions were factored in, pre-tax profits fell steeply from £5.9bn a year ago to £246m. Mr Jenkins said progress will “not always be linear” and said 2013 performance may “moderate” against 2012 due to the cost of the over- haul.

Investec Securities analyst Ian Gordon questioned how different Barclays will actually be under Mr Jenkins’ new vision.

“Shredding? Don’t make me laugh!” he said in a note to clients. He said Mr Jenkins is “reaping, not shredding, Bob’s rich leg- acy”.

“Barcap (£4.1bn), Barclaycard (£1.5bn) and UK retail (£1.5bn) contributed 99.9 per cent of group adjusted pre-tax profits of £7bn,” he said.

Mr Jenkins declined to comment on allegations Barclays lent Qatar money to buy shares in the bank as part of its rescue fundraising in 2008.