Barclays scales back investment banking

Barclays scales back investment banking

Published: May 8, 2014

Barclays to refocus on its core retail business.

Barclays has announced a major reorganisation that will see 7,000 investment banking jobs lost over the next three years. The process is aimed at delivering a “sustainable return on equity above the cost of equity in a changed regulatory and economic environment”, according to the bank's statement to shareholders explaining the new strategy.

The plan entails the creation of an entity named Barclays Non-Core, which brings together all the bank’s assets that “do not fit the strategic objectives or returns criteria”. This entity, containing £115bn (US$195bn) of risk-weighted assets (RWA) with associated leverage exposure of £400bn, consists of £90bn of investment banking RWAs, £16bn of European retail RWAs (its entire business) and £9bn of corporate, Barclaycard and Wealth RWAs. Barclays will look to “run down or exit” these assets.

The bank’s overall aim is reduce the drag effect of non-core assets on group return on equity to less than 3% by 2016, down from 6% now. It has also confirmed that its core investment banking business will represent no more than 30% of the group total by 2016, down on just over 50% now, leading to the loss of 7,000 investment banking jobs by 2016. The overall group headcount reduction for 2014 has been increased to 14,000.

At the moment Barclays’ core business accounts for £320bn of RWAs. Personal and corporate banking, Barclaycard and African banking account for the majority of this, the latter being described as a “longer term growth business with distinct competitive advantages.”