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* To cut 1,800 investment bank jobs, 1,900 in Europe retail
* To shed about 340 branches in Spain, Italy, Portugal,France
* CEO says it will take years to change public view of bank
* Investment bankers' average bonus 54,100 pounds
* Adjusted 2012 pretax profit 7.05 bln stg, up 26 pct
* Shares up 8.6 percent at two-year high
By Steve Slater and Matt Scuffham
LONDON, Feb 12 (Reuters) - Barclays' new chiefexecutive pledged a fresh course for the British lender onTuesday, axing at least 3,700 jobs and pruning its investmentbank as he seeks to rebuild its reputation and boostprofitability after a series of scandals.
In an attempt to distance Britain's third biggest bank fromthe aggressive, high-risk culture championed by his predecessor,Antony Jenkins said Barclays would put ethics above earnings atthe bank, which has become a focus for public anger at theexcesses of the financial sector.
"Barclays is changing. There will be no going back to theold way of doing things. We are changing the way we do business.We are changing the type of business we do," Jenkins said.
"I understand why there is cynicism and scepticism outthere, given the track record of banks in the past. You shouldjudge us by what we deliver in the next one, two, five or 10years," he said at a news conference.
Jenkins unveiled his grand plan, dubbed "Project Transform",at London's Royal Horticultural Halls, an Edwardian exhibitionspace well away from the bank's skyscraper headquarters inCanary Wharf and just a short walk from parliament, wherelawmakers have heavily criticised the bank for its misdeeds.
Keen to show change is afoot, Jenkins cut pay for investmentbankers, halted speculative trading in agricultural commoditiesand closed a profitable tax advisory unit, which one lawmakersaid advised clients on "industrial-scale tax avoidance".
Jenkins, wearing a bright blue tie and sober grey suit, gavea precise presentation but rarely strayed into awkwardterritory. He declined to answer questions about the future ofRich Ricci, head of the investment bank and one of the lastremaining senior executives of the previous era.
"I can't predict the future," Jenkins said.
He committed to keeping the investment bank, whichcontributes more than half of group earnings, and did not go asfar as rivals such as UBS or RBS in cutbacksin this area. He said the division was one of "an increasinglysmall group" of firms winning business and should deliver futurereturns on equity of 14-15 percent.
Investors applauded the bank's plans to raise its dividendand cut 1.7 billion pounds ($2.7 billion) in annual costs,including eliminating 1,800 jobs in corporate and investmentbanking and 1,900 in its European retail and business banking.
He aims to cut compensation to around 35 percent ofearnings, from 38 percent last year and 42 percent in 2011.
"This statement redresses the balance. It is not just aboutthe (dividend) payout ratio going up, it is also a function ofthe compensation ratio going down," said Dominic Rossi, chiefinvestment officer for Fidelity Worldwide Investments, one ofthe bank's 15 biggest investors.
"That was of course what shareholders had been arguing for... (The) balance of distribution between staff and shareholderswas inappropriate and disproportionate towards employees," Rossitold Reuters.
Barclays shares surged to close up 8.6 percent at 327.35pence, their highest level for two years and helping pull theEuropean bank index up 2 percent. The bank's shares areup 75 percent since Jenkins took the helm at the end of August,lifting its value to $62 billion.
POSITIVE FOR UK BANKS
Jenkins, 51, has said he expects "Project Transform", hisplan to revamp the bank, to take five to 10 years and has toldstaff they should leave if they do not want to sign up to thenew standards.
He cut the average bonus for investment bankers to 54,100pounds for last year, down 17 percent on the year. It will pay atotal 1.85 billion pounds in bonuses, down 14 percent.
"We need to give our investors a bigger share of the incomewe generate," he said.
But he warned there would be no quick fix and the bank wouldnot deliver his target of a return on equity above 11.5 percentuntil 2015.
Jenkins will focus investment in Britain, the United Statesand Africa, and cut back in continental Europe and Asia.
Nearly one in three Barclays branches across Italy, Spain,Portugal and France will close, or about 340 branches and salescentres, and remaining retail operations there will focus onaffluent customers.
Jenkins will scale back the investment bank's equities andadvisory businesses in continental Europe and Asia.
He said his "root and branch" review of 75 business unitswill result in four being closed, covering old assets held infixed income and European corporate and retail loans.
A further 17 units, which contribute 2 billion pounds ofincome, could be sold or will need a significant transition tomake the grade, including the tax unit and a raft of Europeanretail operations.
Another 15 units will need restructuring, while 39 areperforming well and will get investment to grow, the bank said.
Jenkins aims to cut the bank's cost base to 16.8 billionpounds in 2015, excluding one-off costs to achieve that of 2.7billion over the next three years, and lift its dividend toachieve a 30 percent payout ratio.
The bank will pay a dividend of 6.5 pence per share for 2012from 6p in 2011, or a payout ratio of 19 percent, which analystssaid was an encouraging signal for it and UK rivals, given thatregulators are telling banks to conserve capital.
Barclays is still recovering from the political furore thatfollowed its $450 million fine for manipulating benchmarkinterest rates in June. The ensuing storm cost the jobs of itsthen chief executive, former Wall Street trader Bob Diamond, andchairman Marcus Agius.
Its bill, meanwhile, to compensate customers for mis-soldproducts has hit 3.5 billion pounds, and investigations arecontinuing into whether it correctly disclosed fundraisings fromMiddle East investors.
The Financial Services Authority and Serious Fraud Officeare probing certain commercial arrangements between Barclays andQatari investors related to two 2008 fundraisings.
The bank reported a 2012 pretax profit of 246 millionpounds, down from 5.9 billion in 2011 due to the cost ofcompensating customers and losses on the value of its own debt.
Its adjusted pretax profit for 2012 was 7.05 billion pounds,up 26 percent on the year and in line with the average forecastby analysts, and the bank said it had a good January.
Pretax profit at the investment bank rose by 37 percent to4.1 billion pounds, stronger than expected, with income down 2percent from the previous quarter but up 13 percent on the year.
