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* Bank says 10,000-12,000 jobs to go, including 7,000 in UK
* Says 'competitive' market drove 10 pct bonus rise
* Investment bankers get average bonus of 60,100 pounds
* Fixed-income slump pushes investment bank to Q4 loss
* Banking is going through "100-year transformation" - CEO
* Shares down 5 pct
By Steve Slater and Matt Scuffham
LONDON, Feb 11 (Reuters) - Barclays said it wouldaxe up to 12,000 jobs this year even as it raised bonuses forinvestment bankers, prompting fury among politicians and unionswho said it had not learned the lessons of the financial crisis.
Britain's third-biggest bank said up to 9 percent ofemployees could go, including 7,000 in Britain, as it tries tolower costs. The cuts are not concentrated in any one businessarea.
It said it paid 2.4 billion pounds ($3.9 billion) inincentive awards last year, raising bonuses at the investmentbank by 13 percent despite a slump in its profits. The averagebonus for the investment bank's 26,200 staff was 60,100 pounds.
Critics of the bonus hike said it showed Britain's biggestbanks were still failing to heed the lessons of a financialcrisis caused by dangerous risk taking and excessive pay.
"Today Barclays has stuck two fingers up to hard-pressedfamilies across Britain by announcing another multi-billionpound bonus pool," said Frances O'Grady, General Secretary ofthe Trades Union Congress.
Barclays Chief Executive Antony Jenkins, who took the helmin 2012 after an interest rate rigging scandal, has vowed toimprove culture and standards at the bank while also reducingrisk and strengthening the balance sheet.
But its investment bank profits slumped 37 percent last yearto 2.5 billion pounds and analysts voiced concern about whetherJenkins can reach his target of a return on equity above 11.5percent by 2016.
Getting costs down looked more challenging than expected,they said, while increased regulatory pressure and a grimoutlook for fixed-income revenue made the target on returns lookdifficult to achieve.
Barclays shares were down 5 percent at 261 pence by 1255GMT, underperforming a 0.7 percent rise by an index of Europeanbanks.
"WE NEED THE BEST PEOPLE"
The higher bonuses lifted the compensation-to-income ratioin the investment bank to 43.2 percent last year from 40 percentin 2012. Jenkins, who gave up his own bonus for 2013, said hestill aimed for a ratio in the "mid-30s" across the bank.
He defended the bigger bonus pot, saying the bank had torecruit the best staff to compete with global rivals andcontinued to have "constructive" talks with investors over pay.
"We need to recruit people from Singapore to San Francisco.We need the best people in the bank to drive long-termsustainable returns for our shareholders," Jenkins toldreporters on a conference call.
"I understand that there will be some (people) who feel thatthis decision is the wrong one for Barclays. But it is thedecision of the board and myself that this entirely is the rightdecision for the group and in the long-term interests ofshareholders," he said.
But business leaders' group the Institute of Directors saidthe bank's bonus policy raised the question of whether it wasbeing run for its shareholders, or its staff.
"It cannot be right in any business for the executive bonuspool to be nearly three times bigger than the total dividend payout to the company's owners," said Roger Barker, the institute'sdirector of corporate governance.
Britain's opposition Labour party said the pay-outsunderlined the case for a new tax on banker bonuses, which itwould use to fund work for unemployed young people.
INVESTMENT BANKING LOSS
Jenkins said banking was going through a "100-yeartransformation" as technology and cost pressures reshape theindustry, and he was optimistic that Barclays was well set for a"pivotal" 2014.
The bank said 820 senior roles would go, and half of thosewere cut at the investment bank in the last two weeks. Half ofthe affected staff in the UK had already been notified.
It cut 7,650 jobs last year, including 1,400 in theinvestment bank, as part of a restructuring unveiled a year agoby Jenkins to cut 1.7 billion pounds of annual costs. There were139,600 Barclays employees by the end of the year.
Investment bank income fell 9 percent last year to 10.7billion due largely to a fall in fixed income.
The investment bank made a loss of 329 million in the fourthquarter, hit by restructuring costs, a 220-million-pound chargefor litigation and regulatory penalties and a 333 million costto pay a UK bank levy.
Revenue in the fourth quarter from fixed income, currenciesand commodities fell 16 percent from a year ago, echoing theweak performance across investment banks and not as steep a fallas seen at big rival Deutsche Bank. Barclays'equities income rose 9 percent from a year ago, and advisory andunderwriting income fell 5 percent.
Barclays had already released headline results showing itsearnings dropped by a third last year to 5.2 billion pounds,falling short of analyst forecasts due to the investment bank'sslump.
The bank is successfully cutting its balance sheet, analystssaid, and 196 billion pounds in the second half of last year wasmore than double its target, helped by 55 billion due to foreignexchange movements. Barclays said it would aim to cut at leastanother 63 billion pounds to get the balance sheet below 1.3trillion pounds, based on the UK regulator's calculation ofleverage exposure.
Barclays said it expected to improve its leverage ratio toat least 3.5 percent by the end of next year, from just under 3percent at the end of last year and 2.2 percent at the end ofJune. The UK regulator forced Barclays to raise 6 billion poundsfrom investors in October to improve the leverage ratio.
The bank said it remained committed to paying out 40-50percent of its adjusted earnings in dividends.
