Barclays chief executive Antony Jenkins plans to take an axe to the cost structure of the bank, closing a quarter of its 1,600 branches in the UK and cutting hundreds of investment banking jobs. He will also outline new five-year targets for the lender next month.
The move underlines the UK bank’s need to improve profitability in the face of a tougher regulatory climate. But analysts said the branch closures also highlighted how banks across the world view new technology as a unique chance to improve customer service while cutting costs.
“This is a fundamental 100-year transformation of the banking industry, that’s what I think we are seeing,” said a person familiar with the plans of Barclays, which will replace some of the 400 branches it is closing with smaller sites in Asda supermarkets.
Other UK banks, including Lloyds Banking Group and Royal Bank of Scotland, are expected to follow Barclays’ lead by closing branches and encouraging more customers to use new smartphone applications, analysts said. The cuts could prove controversial with politicians and consumer groups, which are concerned about the exodus of banks from the high street.
Mr Jenkins, who took over in 2012 when Bob Diamond was ousted over the Libor rate manipulation scandal, has focused on cleaning up Barclays’ culture and improving profitability with a plan to cut £1.7bn of costs by next year.
But when he presents annual results on February 11, Mr Jenkins will also set eight new targets as part of a five-year “balanced scorecard”, comprising two financial objectives and six wider “good citizen” aims concerning staff, customers and broader society.
The new objectives will include an update to the bank’s earlier promise to achieve a return on equity above its cost of capital by 2016, and a core tier one capital ratio – a crucial measure of financial strength – of 10.5 per cent by 2015.
Other objectives include increasing the number of women in senior roles and improving trust in the bank as measured by a YouGov poll.
On Tuesday, it emerged that Barclays plans to cut another several hundred jobs at its investment bank, which has come under pressure to cut costs amid falling revenues and stricter regulatory capital rules.
The investment banking operation, which bought the US arm of Lehman Brothers in 2008 and now employs about 25,500 of Barclays’ 140,000 staff, will make up to 400 managing directors and directors redundant – mostly in London and New York, people close to the situation said. The cutbacks come on top of 1,700 staff reductions in its trading and advisory unit announced a year ago.
Barclays is also clamping down on travel expenses, with a message to the staff in recent weeks that international travel should be restricted to “essential” external meetings.
Its investment bank was hit hard last year by a slump in the sales and trading of bonds and other fixed income products – a factor that contributed to a €1bn quarterly loss at its main European rival Deutsche Bank.
The cost-to-income ratio for Barclays’ retail bank is about 66 per cent. That is skewed by the fact that its lower cost credit cards business is reported separately. But Ashok Vaswani, head of the retail business, has said he wants to cut that dramatically.
Meanwhile, Co-operative Bank is planning to shrink its branch network by 15 per cent as it slims down the business after being forced to raise £1.5bn of fresh capital. Lloyds has committed to maintaining its 2,200-strong network until the end of the year – but may consider closures after that.