Barclays Cuts Jobs, Reduces Non-Core RWAs in Revamp

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May 8 (Bloomberg) –- OTAS Technologies Head of Research Simon Maughan and Bloomberg’s Manus Cranny discuss the overhaul at Barclays and what the strategy means for its investment banking unit with Mark Barton and Anna Edwards on Bloomberg Television’s “Countdown.” (Source: Bloomberg)

The strategy that berkeley is updating us on today -- barclays is updating us on.

I think the headline is the reduction and what will be the investment banking assets from 50% down to 30%. that is basically what shareholders have been asking for.

They haven't asking for the bank to be cut down to size.

That is been an extremely difficult thing for jenkins to do because they have a business that 15 years or more has been built up.

And driven by this engine of growth in fixed income that has become extremely large.

He's finally in a position to parent down.

-- pare it down.

This will be politically challenging.

Why wasn't this in his original strategy report?

The answer is, he did not have the power.

Barclays is a more democratic board and some.

Some banks run much more autocratic way.

I think it was very difficult with the power struggles going on to do this reduction.

Now we see jenkins saying, i am in control.

You focus on the risk weighted assets.

That comes up that credit suisse and uibbs, but what he is trying to do, is he facing a better market to reduce his risk weighted assets than the others did?

How tough is it going to be to do this?

It is tough to sell assets you do not want, because more than likely, nobody else wants them, either.

If you look at what is happening of the 115 billion being put aside, 90 billion coming from the fixed income currencies, commodities business.

A lot of that are derivatives.

They will know the duration of the derivatives.

They will know how quickly it will run down.

Jenkins use the word death spiral.

7000 jobs to go.

Is this what a death spiral looks like?

Is this no longer an international global lawyer or am i fishing for a headline?

He was talking about a position where you lose control over who leads the bank.

This is him being in control of who leaves the bank and keeping the businesses, the client facing businesses, that he wants to keep.

I think this is absolutely about avoiding the death spiral.

Whether they will be able to compete at the highest level, i suspect regulatory pressures here and those building in the states against foreign owned investment banks will make that an extremely difficult -- how much was a -- how much of a blow was the americas head?

They will of know what is happening.

You wonder when, anyone that is worked in investment banking know is that there is a handful of guys putting on a huge position for the banks capital in the derivatives market to make a lot of money.

They are heroes.

The bosses lineup for them.

Knowing that business will be downsized, a lot of people jump ship, because that was their big payday, gravy train.

No one is going to pay out of fixed-income derivatives sitting in a bad bank.

People talked about the lehman brothers culture.

Is that gone now?

Is barclasyys the new culture?

That is the message they will be given.

I'm not sure they're necessarily was a lehman brothers culture.

There was within the u.s., but it was a cultre ofure of the investment bank, built from the ashes.

Built into a global positioning when everybody outside said they could not do it.

Everybody outside the bank and said downsized, downsized.

This is barclays giving in.

How much of this is tied to the rate environment?

Both the building up of the investment bank and then the rolling back of that now?

In barclaysys and deutsche, if you look at the 12 month forward roe, you get a cost of capital very similar for both stocks.

Both of those built their global businesses at a time when fixed income was booming.

That was the obvious place to build it.

So they are more exposed than some.

Every bank is facing this rate environment.

Every bank is facing this situation.

This is to do with regulatory pressure.

This is to do with high-cost space.

This is to do with not quite having the broad enough spread of businesses to handle that slow down and rates and stay at the top table.

This change that he's announced today is reducing the investment bank, and reducing the risk weighted assets, but he has got to balance that out for investors.

Has he got enough other businesses to equate to why you want to own barclays as a stock?

The key for that is return on equity.

If we look at the forecast a couple of years out, 2015, 8 .9%. he is talking about a drag of three percent by 2016. you are nearly at the 12% forecast that he wants to hit.

I do not think there is a lot of long-term upgrade here.

I think this is what has to happen to deliver what people already expect is going to happen.

And that is because i think people then realized -- don't realize how tough it is.

There is a risk of downsizing shares?

On the headlines, i would be surprised given the weak performance.

If i look at the way the shares were trading on tuesday, they dropped on the initial bad numbers, but the rest of the day, there was nothing.

They traded in line with a basket of their peers.

No buying interest at all.

I think people were waiting for today's announcement.

There will be enough in the headlines for those who are waiting and have got something.

Longer-term, when we reflect on what this means, i think we will definitely say that there is not a lot of upside to the 2016 number, and there is a risk that if the macro environment does not pan out, they will not get their.

Great to hear your thoughts.

This text has been automatically generated. It may not be 100% accurate.


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