Barclays Bank Employees Apprehensive About Job Cuts Amid Declining Profits

25 Oct, 2023

Barclays Bank Employees Apprehensive About Job Cuts Amid Declining Profits

Barclays bank is mulling over cost-cutting measures as it reported a minor decline in pre-tax profits, which fell by 4% to £1.9 billion in the third quarter. This dip in profits was attributed to concerns about a potential increase in customer defaults and a slowdown in corporate dealmaking, impacting returns at the investment bank.

The bank also faced a more significant than expected drop in deposits and cautioned that its net interest margin, the difference between mortgage charges and savings payouts, was likely to decrease in the fourth quarter, further squeezing its income. In response, executives are planning a series of "structural" cost reductions with the aim of increasing dividends for investors.

When asked whether these cost-cutting plans would involve job losses, including in the UK, Chief Executive CS Venkatakrishnan stated, "We always modulate the size of our workforce everywhere in the world in which we are, and that's what we will continue to do." He emphasized the search for efficiencies throughout the bank and efforts to enhance productivity.

While Venkatakrishnan did not provide specific details, he assured investors that updates on the bank's capital allocation priorities and revised financial targets would be offered after the release of Barclays' full-year results in the new year. However, this news led to a 7% drop in Barclays' shares on the same day.

The bank's corporate and investment bank witnessed a substantial 11% decrease in profits during the third quarter, attributed to a broader decline in client activity. Additionally, there was a 14% increase in funds set aside for potential defaults, reaching £433 million compared to £381 million the previous year. Nonetheless, funds allocated for defaults in the UK business declined by 27% during the third quarter, indicating optimism about the ability of mortgage borrowers to keep up with payments despite rising interest rates.

Barclays' finance director, Anna Cross, noted limited signs of credit stress, while net interest income at the UK bank increased by just 1% to £1.6 billion in the quarter. This move is likely to appease campaigners who have criticized banks for not passing on higher interest rates to savers while increasing charges for home loan customers.

Venkatakrishnan mentioned a 6% decline in deposits, partly due to price inflation forcing customers to pay more for everyday goods. Additionally, competition in the savings market saw clients choosing rival banks offering higher interest rates.

Regarding the Financial Conduct Authority's (FCA) recent fine and ban of his predecessor, Jes Staley, from the City for misleading the regulator over his relationship with Jeffrey Epstein, Venkatakrishnan declined to comment further. He also refrained from speculating on the potential resignation of other Barclays executives, including Chairman Nigel Higgins, in connection to the matter.