Barclays PLC expects to axe up to 12,000 jobs this year to cut costs and counter falling income at its investment bank, where profits slumped last year.
However, it is also paying staff higher bonuses, risking a backlash from the politicians and taxpayers who bailed out much of the industry during the financial crisis.
The bank said yesterday that 7,000 of the jobs will go in Britain and half of the affected staff there had already been notified.
Chief executive Anthony Jenkins, who took the helm in 2012 after an interest-rate rigging scandal, is pulling Barclays out of some investment banking activities as part of efforts to clean up standards and improve returns. The bank last year targeted US$1.7 billion in annual cost savings.
It said it paid ￡2.4 billion (US$3.9 billion) in incentive awards last year after raising bonuses in its investment bank by 13 percent despite the profit decline.
That helped lift Barclays’ compensation-to-income ratio to 43.2 percent last year from 40 percent in 2012. It said it still aimed for a compensation ratio in the “mid-30s.”
Jenkins defended the increases, saying Barclays had to compete with global rivals to recruit the best staff. He said the bank was having constructive talks with investors over pay.
“We need to recruit people from Singapore to San Francisco. We need the best people in the bank to drive long-term sustainable returns for our shareholders,” Jenkins told reporters on a conference call.
Shares in Barclays were down 1.9 percent during trading yesterday.
The bank had already released headline results showing its earnings dropped to ￡5.2 billion last year, falling short of analyst forecasts as investment bank revenue slumped in the fourth quarter.
Profits at the investment bank slumped 37 percent to ￡2.5 billion, as income fell 9 percent on the year to ￡10.7 billion due largely to a decrease in fixed income.
Barclays said it expects to improve its leverage ratio to at least 3.5 percent by the end of next year as it reduces its balance sheet.
Its leverage ratio improved to just under 3 percent by the end of the year from 2.2 percent at the end of June. The UK regulator forced Barclays to raise ￡6 billion from investors in October to improve its leverage ratio.
The bank said it remained committed to paying out 40 percent to 50 percent of its adjusted earnings in dividends.