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(Repeats Friday item)
* Barclays pares back ambitions to be Wall Street powerhouse
* Jenkins doesn't expect talent exodus after U.S. departures
* Traders spruce up their CVs, talk to headhunters - source
* Barclays to remain largest investment bank in Europe
By Steve Slater
LONDON, May 9 (Reuters) - Where Barclays sees a"generational shift", its investment bank rivals are smellingblood.
The British bank, which under former chief Bob Diamondpoached top staff and customers from competitors in troubleafter the financial crisis, now risks suffering the same fate asit radically shrinks its investment banking business.
Diamond's successor as Chief Executive, Antony Jenkins, sayshe does not expect a further exodus of top talent afterdepartures from Barclays' U.S. operation, but some trading staffat least are preparing for the exit as the bank pares back itsambitions to be a Wall Street powerhouse.
Barclays announced this week plans to shrink its debttrading business and axe a quarter of staff, focusing instead onU.S. and British clients and products where it ranks in the topfive in business such as selling government bonds, stocks andcurrencies and advising on deals.
Tom King, who made his career advising telecoms firms ontakeover battles, is tasked with making the strategy work andhailed it as a "step change" that was needed in a new era oftougher regulations that have made some trades too expensive.
"We're really shifting the investment bank from one that wasa business run for revenue to one that is being run for return,"King said on Thursday.
The worry for Jenkins and King is that top staff and clientsleave and the business slowly dies, echoing the problems ofCredit Suisse First Boston when it bought Donaldson, Lufkin andJenrette for $11 billion in 2000, only for many senior bankersthere to depart.
Jenkins, who previously ran Barclays' retail business andhas no background in investment banking, admitted he feared a"death spiral" after an exodus of staff from its U.S. businesslast year. This prompted him controversially to raise bonusesfor 2013 despite a fall in profits.
King himself left Citigroup for Barclays in 2009 because thebailed out U.S. group was scaling back its investment bank whileBarclays, under former debt trader Diamond, was vowing to takeon Wall Street after its takeover of the U.S. division of LehmanBrothers.
Even before Thursday's announcement, the atmosphere amongBarclays' dealers was grim. People who feared the chop werealready arriving to work late and leaving early, spending thetime in-between sprucing up their CVs and talking toheadhunters, said one person within the bank.
"Whenever this sort of thing happens the best people will begetting a lot of inbound calls. This won't be any different,"said a senior banker at a rival.
FREEING UP THE TOP FLOORS
Jenkins wants his bank to be more balanced and with lowercosts to boost profitability.
Cutting thousands of jobs could save the bank more than 1billion pounds ($1.7 billion) a year based on average pay.Winding down large parts of its trading book will help to reducethe investment bank's use of capital to 30 percent by 2016 from51 percent last year.
The result will be a dismantling of much of the bond trading powerhouse built up by Diamond in the decade prior to the2008/09 financial crisis. Much of the former Lehman business,which includes the U.S. equities and advisory desks, will stayat the heart of the smaller firm.
For Barclays, that means focusing on its strong "home"markets of the United States and Britain, which account for 60percent of global market business. It will cut back hard inAsia, largely serving only big clients' needs there and Asiancustomers who want help on overseas deals.
There have already been a series of high profile departuresin the United States, including Hugh 'Skip' McGee, the head ofits Americas business who was the most senior ex-Lehman banker.The bank also lost Ros Stephenson, Paul Parker and LarryWieseneck.
"I'm not concerned at all about the level of departures.What we're seeing is a something of a generational shift,"Jenkins said on Thursday as he unveiled his plan.
"We're seeing some of the senior leadership saying it's theright time for them to move on," he said. "We're seeing lowlevels of attrition in the people that are going to be runningthe bank going forward, the next generation of MDs."
Senior sources at the bank concurred, and said many of thesenior people had left after missing out on the top job taken byKing, a U.S. native who moved to London for a couple of years in1999 and stayed for over a decade. He is now based in New York.
Industry sources said this is part of a wider trend in theindustry. "I feel that banks are in a mode to reduce the seniorlevel," a source at another bank said. "The only way to protectand promote the mid-level talent is by freeing up the top."
Barclays has said it plans to cut 7,000 investment bank jobsin the next three years, with about 2,000 of those this year.
It plans to put 340 billion pounds of investment bank assetsinto a new "non-core" unit where they will be run down, so wholeteams will be cut. Staff in those areas that the bank wants tokeep may have bonuses based on hitting asset reduction targets -something which UBS did as it shrank its business after abailout by the Swiss state.
At Barclays, Eric Bommensath - the former fixed income bosswho became co-head of the investment bank with King a year ago -is in charge of the non-core business and no longer sits on theexecutive committee.
CUTTING COSTS
Barclays faces risks in carrying out its plan. It will "meaningfully reduce" the number of clients, with most focus onthe top 1,000 who deliver 75 percent of the investment bank'srevenues.
The investment bank will also still be left with 490 billionpounds of assets. While smaller than U.S. players such as JPMorgan, it will remain the largest investment bank inEurope with more assets than the "core" businesses of DeutscheBank and Credit Suisse after they alsopruned operations.
Barclays is exiting most commodities business and is likelyto retreat from areas including emerging markets and interestrate trading products, structured products, securitisation andcross currency swaps.
Areas where the bank is strong - such as rates in the G10leading economies, foreign exchange and credit trading and debtcapital markets - will be less affected. It is also stickingwith its equities and advisory operations, which have expandedin the last three years, require less capital and appear set foryet stronger growth.
Bankers said that while Barclays lags some rivals with itsplans, it won't be the last to take radical action.
"In the next year or two, more people will shrink or pullout. We've not seen anything meaningful other than UBS and RBS.Deutsche is going through some change and now Barclays, butthere's still a lot more to come," a senior rival banker said.
"It's a painful process. The key questions are where do youpick your spots, and you need to be disciplined." ($1 = 0.5899 British Pounds) (Additional reporting by Clare Hutchison, So-young Kim,Lawrence White and Katharina Bart; Editing by Carmel Crimminsand David Stamp)
