Barclays chief signals more job losses despite profit rise
Barclays boss John McFarlane has signalled more job cuts to come at the bank as he set out plans to ramp up earnings growth and squeeze costs after half-year profits jumped by 25% but returns for shareholders remained low.
The executive chairman would not confirm reports that 30,000 jobs at the bank are to go but admitted that its new strategy of slimming down its international presence and streamlining executive decision-making would take its toll on numbers.
However Mr McFarlane, who has taken temporary charge after chief executive Antony Jenkins was fired, signalled that he wanted to slow the pace of branch closures after their number fell by 98 over the last year.
Early indications were that a replacement for Mr Jenkins looked likely to be appointed from overseas.
Interim results showed pre-tax profits climbed to £3.11 billion in the first six months of the year but the dividend for this year will be flat at 6.5p, well below its level before the financial crisis.
The profit rise comes despite a £1 billion hit during the period to fund compensation schemes over past mis-selling scandals involving products such as payment protection insurance (PPI) including £850 million in the second quarter.
Mr McFarlane acknowledged that the lender needed to “accelerate growth in earnings” and slash its ratio of costs to income as he admitted the dividend to shareholders needed to be several times higher.
Disappointing returns for investors had been one of the reasons cited when Barclays dispensed with Mr Jenkins three weeks ago.
The bank wants to accelerate the pace of change and Mr McFarlane said it would “act quickly to curtail activity which is marginal or which will not deliver the return on equity we require”.
Barclays is already undergoing a major cost-cutting programme which saw 14,000 posts slashed last year and is expected to see 5,000 more axed by 2016.
Since Mr Jenkins’s departure there has been speculation that the group plans to shrink its workforce further, taking it from 132,000 to below 100,000 by the end of 2017.
Mr McFarlane said: “We’ve actually not made that decision and we have not confirmed any such number.
“It is fair to say that with the actions we will take, the company will get smaller in terms of headcount but we are not going to speculate on what that is and actually at this point in time we don’t know what that is.”
Though he did not spell out where the axe would fall, he singled out “hierarchical, bureaucratic and group-centric” decision-making and hinted that parts of business outside core markets in the UK, US and South Africa looked set to be slimmed down.
Branch numbers fell to 1,448 at the end of June compared to 1,546 a year before at a time when the industry is scaling back costs by using automated services for customers while online and telephone banking is growing.
But Mr McFarlane indicated he wanted the pace of closures to be scaled back.
He said: “I think the customer should deal with us the way they want to deal with us, not the way we want to deal with them.
“I would slow down bank closures rather than accelerating them. I am particularly hostile to closing the last bank in town.”
However, he added that many customers were “voting with their feet – in terms of using their fingers” by increasingly banking over the internet.
Mr McFarlane was warmer about Barclays’ investment banking arm than his predecessor – who took an axe to the division – saying he was pleased with its progress and optimistic about its future after it grew profits by 36% to £1.44 billion.
But he said there was no ambition to be a “100-country global investment bank” on the scale of US giants such as JP Morgan and Goldman Sachs.
The chairman said that a global search was in place for a new chief executive and early indications were that there was “probably more fertile ground internationally rather than domestically” for a new boss
An initial “long-list” of candidates was due to be presented by executive head hunters shortly, he added. Internal as well as external candidates would be considered.
Finance director Tushar Morzaria brushed off speculation linking him with the job saying he was focused on his current role.
Mr McFarlane said the bank had “broken the back” of changes in the bank’s culture needed after the scandals that arose in the wake of the financial crisis, though it is continuing to pay the penalty for misconduct.
Results showed that Barclays put aside £600 million for PPI redress and £250 million for mis-selling of packaged bank accounts – which charged fees to customers in exchange for benefits – in the second quarter.
