Barclays Capital, the securities unit of Barclays Plc, is preparing to eliminate hundreds of jobs in the next two months following a decline in investment banking revenue, three people familiar with the matter said.
The cuts will follow a review how much capital each unit of the business uses, said two of the people, who declined to be identified as the details aren’t public. That review will be completed in January, one of the people said. A spokesman for Barclays in London declined to comment.
The lender, which purchased Lehman Brothers Holdings Inc.’s North American unit in September 2008, has added 2,000 people from Europe to Asia in the past year to expand its equities and merger advisory operations outside the U.S. Revenue at Barclays Capital dropped 24 percent in the third quarter to 2.8 billion pounds ($4.35 billion) as earnings from fixed income, currency and commodities trading fell. The bank’s cost-to-income ratio rose to 71 percent from 62 percent in the year-earlier period.
“Compensation ratios have to come back down after investment banks lost control of them,” said Simon Maughan, co-head of equities at MF Global U.K. Ltd. in London. “It’s good news for shareholders.”
Barclays raised investment bankers’ base salaries as a proportion of total pay, a person familiar with the matter said in December last year.
Revenue from fixed-income, currencies and commodities trading fell at most investment banks in the most recent quarter. Credit Suisse Group AG said in October fixed-income sales and trading revenue in the third quarter fell to 1.46 billion Swiss francs ($1.6 billion) from 2.48 billion francs in the year-earlier period.
Barclays will continue to hire employees in its equities and mergers advisory teams in Asia, one of the people said.
Other firms have also been cutting employees or freezing their numbers. Morgan Stanley stopped hiring at its investment-banking unit for the rest of the year, a person briefed on the decision said in September. Bank of America Corp. is firing as many as 400 employees in its global banking and markets division, a person briefed on the matter said in the same month. Barclays Capital also cut 300 jobs across administrative and support functions, a person familiar said in August.
Barclays Capital, which previously focused on bonds, loans and foreign exchange, climbed to fifth place in the rankings for advisers on global takeovers this year from seventh in 2009, according to data compiled by Bloomberg.