Barclays likely to cut jobs as profits dip

Barclays is preparing for potential job cuts following an announcement by executives of a new round of cost reductions aimed at increasing dividends for shareholders. The bank reported a slight decline in pre-tax profits in the third quarter, down 4% to £1.9 billion, primarily due to concerns about potential customer defaults and a slowdown in corporate dealmaking that affected returns in its investment bank. Additionally, Barclays saw a larger-than-expected decrease in deposits and anticipated a fall in its net interest margin in the fourth quarter, which would further impact its income.

In response to the need to enhance dividends, executives are planning “structural” cost-cutting measures, and job losses, including in the UK, may be part of this strategy. CEO CS Venkatakrishnan explained that workforce size adjustments are common worldwide and that the bank is focusing on increasing productivity and efficiency across various parts of the organisation. Further details about these cost-cutting efforts, as well as revised financial targets and capital allocation priorities, will be provided after Barclays releases its full-year results in the new year.

The announcement of these plans had a negative impact on Barclays’ stock price, causing it to drop by 7% on Tuesday morning. Profits from the bank’s corporate and investment bank declined by 11% in the third quarter, attributed to reduced client activity. The bank also set aside more money for potential defaults, with a 14% increase compared to the previous year. However, defaults at its UK business decreased by 27% in the third quarter, indicating confidence in mortgage borrowers’ ability to meet their payments, despite rising interest rates.

Barclays’ net interest income in the UK increased by only 1% in the quarter, and while this may be welcomed by those who believed banks were not passing on higher interest rates to savers, it is expected to contribute to a decline in net interest margins in the fourth quarter. The bank’s finance chief noted a 6% drop in deposits, which exceeded their expectations, partly due to price inflation and competition in the savings market, where clients chose banks offering higher interest rates.

Regarding the recent fine and ban imposed on the former Barclays CEO, Jes Staley, by the Financial Conduct Authority (FCA) for misleading the regulator about his relationship with Jeffrey Epstein, CEO Venkatakrishnan declined to provide additional commentary. He mentioned that he is recused from such matters. When asked about the potential impact on other Barclays executives, including the chair, Nigel Higgins, he refrained from commenting further.