Barclays bankers fear cost-cutting job losses after profits fall

Kalyeena Makortoff Banking correspondent
Tue, 24 October 2023 

Photograph: Stefan Wermuth/Reuters

Barclays bankers are steeling themselves for potential job losses after executives warned of a fresh wave of cost cuts intended to boost payouts for their shareholders.

The lender reported a slight drop in pre-tax profits on Tuesday, which fell 4% to £1.9bn in the third quarter amid concerns over a potential rise in customer defaults and a slowdown in corporate dealmaking that hit returns at its investment bank.

Barclays also suffered a larger-than-expected drop in deposits and warned that its net interest margin – the difference between what it charges for mortgages and what it pays out to savers – would probably fall in the fourth quarter, putting a further squeeze on its income.

Executives are now planning a wave of “structural” cost cuts that they said would boost dividends for investors.

When asked whether the cost-cutting plans would involve job losses, including for UK staff, the chief executive, CS Venkatakrishnan, told journalists: “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 said Barclays bosses would “look for efficiencies in different parts of the bank … We are trying to make, and create, and run, a more efficient organisation … and you should expect us to look in all those places where we think we can increase productivity”.

Venkatakrishnan refused to give further details but said the bank would provide an update for investors after the release of Barclays’ full-year results in the new year, “which will include setting out our capital allocation priorities, as well as revised financial targets”. The news sent Barclays shares down 7% on Tuesday morning.

Profits from the lender’s corporate and investment bank tumbled 11% in the third quarter. While the bank recently took part in Arm’s $65bn (£53bn) stock market debut, bosses said the division’s woes reflected “lower client activity” more broadly.

There was also a 14% rise in the amount of money put aside for potential defaults, to £433m compared with £381m a year earlier. However, the cash put aside for defaults at its UK business fell by 27% in the third quarter, suggesting confidence about the prospect of mortgage borrowers keeping up with payments, despite rising interest rates.

“We continue to see limited signs of credit stress,” Barclays’ group finance director, Anna Cross, said.

Meanwhile, net interest income at the UK bank rose just 1%, to £1.6bn in the quarter. The figure is likely to be cheered by campaigners who claimed banks were failing to pass on higher interest rates to savers while raising charges for home loan customers.

“We have been very disciplined and prudent and pass through interest rates to customers,” Venkatakrishnan said.

Cross said customers, particularly Barclays’ wealthy, private banking clients, were moving cash into savings accounts that offered higher interest rates. The trend is expected to contribute to a drop in net interest margins in the fourth quarter.

The lender’s finance chief said it had suffered a 6% drop in deposits, which was “a little higher than we anticipated”. That was partly due to price inflation that had forced customers to pay more for everyday goods, as well as competition in the savings market that had seen clients park their cash with rival banks offering higher interest rates.

Venkatakrishnan was also pressed over the Financial Conduct Authority’s (FCA) decision to fine and ban his predecessor, Jes Staley, from the City, this month for misleading the regulator over his relationship with Jeffrey Epstein.

“I’m really not going to add commentary to this topic,” Venkatakrishnan said. “The FCA has made extensive disclosures, the bank has issued an RNS [market statement] in response, including the action of the board’s remuneration committee. I have told you since the day I took this job that I’m recused from all of this.”

When asked whether the matter could lead to the resignation of other Barclays bosses, including the chair, Nigel Higgins, Venkatakrishnan said he would not comment further.