Barclays in costs programme as first-half profits down a third

The bank’s performance was more resilient than its rivals, however, as bad debts tumbled and it kept costs steady.

Chief executive Bob Diamond said Barclays had cut 1,400 jobs during the first half, and the total was likely to rise to about 3,000 by the end of the year.

“We haven’t set specific headcount numbers, but I would expect the trend in the first half to continue and I think it would be likely to increase,” Mr Diamond said.

The staff cuts amount to about two per cent of Barclays’ total workforce of 146,100.

Half the cuts so far in 2011 were at BarCap, which shed the same number in the second half of last year.

The lay-offs reverse an aggressive build-up that included its 2008 takeover of the United States arm of Lehman Brothers and equities and advisory expansion. BarCap has 24,100 staff.

“A key part of getting our returns to where we want them to be is the cost programme we have put in place and that is going well,” Mr Diamond told reporters on a conference call.

Barclays joins a growing line of banks, including HSBC, Goldman Sachs, Credit Suisse and UBS who have announced thousands of jobs cuts in recent weeks.

“It’s better on costs and impairments, and within the revenue line BarCap had a relatively strong quarter compared to its peer group,” said Mike Trippitt, analyst at Oriel Securities. “It has been a savage market out there.”

Pre-tax profit for the six months to the end of June was £2.6bn, down 33 per cent from a year ago but above the average forecast of £2.4bn among analysts polled by the company.

Mr Diamond is aiming to cut £1bn of annual costs and reckons he could even double that goal, as well as generate more than £6bn per year of extra revenue by 2013 under a plan to improve the business.

The bank’s return on equity improved to 9.1 per cent in the first half from 6.9 per cent a year ago. Mr Diamond is targeting a level of 13 per cent by 2013.

Problems around peripheral euro zone countries were likely to continue in the second half, before a recovery in market confidence late this year or early 2012, he said.

Weakness at investment bank arm BarCap had continued into July, the bank said, and trading is likely to remain tough.

“We are planning on a market environment in the second half that is pretty sluggish and similar to the first half,” Mr Diamond told analysts on a conference call.

BarCap’s income fell to £2.9bn in the second quarter, down 14 per cent on the first quarter, but BarCap’s co-chief executive Rich Ricci said he remained confident it could hit its targeted £3.5bn to £3.6bn of quarterly income in normal market conditions.

Fixed income trading plunged across the industry in the second quarter as the euro zone debt crisis curtailed activity.

BarCap’s fixed income, currencies and commodities (FICC) income in the second quarter fell 22 per cent from the first quarter, although most rivals had shown a drop of a quarter to a third.

Income from advisory business fell, which analysts said was disappointing given its investment in this area, but equities income rose in the second quarter.

Barclays took a £1bn charge to cover compensation for the mis-selling of insurance policies in Britain, which had been signalled previously. French rival BNP Paribas reported results which fell short of expectations, partly due to sluggish retail growth.