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Barclays to cut 7,000 jobs by 2016

Barclays Plc will cut 7,000 jobs at its investment bank, about a quarter of the total, as chief executive officer Antony Jenkins tries to revive profit by reducing the lender’s dependence on the unit.

The lender will eliminate 14,000 jobs across the firm this year, up from the 12,000 cuts it announced in February, Barclays said in a statement today. The lender will also create a bad bank to dispose of £115 billion (US$195 billion) of assets, including complex derivatives and parts of its commodities unit.

Jenkins, a consumer banker by training, has been under pressure from investors to overhaul investment bank, which this week posted a 49 per cent drop in pretax profit. The unit will account for 30 per cent of the company’s assets by 2016, down from 50 per cent today, Barclays said today. Jenkins said today the core bank will target a 12 per cent return on equity in 2016.

“This is a bold simplification of Barclays,” Jenkins said in the statement. “We will be a focused international bank, operating only in areas where we have capability, scale, competitive advantage.”

The bad bank will hold £90 billion of risk-weighted assets from the investment bank, including parts of its fixed- income, currencies and commodities operation, as well as some emerging-market specific products. It will also include £16 billion of assets from the European retail and business bank as well as £9 billion of assets from the corporate bank, Barclaycard and wealth-management units.

‘More Balanced’

Jenkins will seek to cut the so-called non-core assets to £50 billion by the end of 2016.
“As a consequence of these changes, Barclays will become significantly more balanced and in turn able to deliver higher, more sustainable returns through the cycle.”

Barclays has fallen 11 per cent this year in London trading, the worst-performing U.K. bank in the period.

Pretax profit at the investment bank fell to £668 million in the first quarter from £1.32 billion in the year-earlier period, hurt by a decline in revenue from trading bonds, currencies and commodities.

The operation has suffered departures of key dealmakers as compensation at the division came under scrutiny. In the past week, Jenkins has lost Hugh “Skip” McGee, the firm’s most senior banker in the U.S., Robert Morrice, chairman of the Asia- Pacific region, as well as investment-banking chairman Ros Stephenson.