Barclays unveils plans to cut jobs alongside annual results

Banking giant Barclays revealed Tuesday it was slashing 3,700 jobs as part of a massive shake-up amid a string of scandals. The cuts include 1,800 in the Corporate and Investment Bank division and 1,900 in Europe Retail and Business Banking which will result in a restructuring charge of about £500m during the first quarter of this year. The bank laid out its plans to cull its 140,000-strong workforce alongside its annual results for 2012.Adjusted profits before tax grew 26% to £7.05bn for the year ended December 31st, with an improvement of 46% in Corporate and Investment Banking and 52% in Wealth and Investment Management. The results fell slightly short of market expectations of £7.07bn profits.Statutory profit before tax decreased to £246m, compared to £5.9bn a year ago. The bank said it reflected a £4.6bn own credit charge and provisions of £1.6bn and £850m for payment protection insurance and interest rate hedging products redress, respectively. Revenues, on the other hand, beat the £27.8bn forecasts as it climbed 2.0% to £29.04bn for the year despite challenging economic conditions, low interest rates and non-recurrence of gains from the disposal of hedging instruments in 2011 of £1.0bn.Adjusted return on average shareholders' equity rose to 7.8% compared to 6.6% the previous year. Dividend per share rose to 6.5p, up from 6.0p in 2011, marginally above the 6.45p estimate. Shares rose 4.16% to 314.05p at 9:30 following the announcement. The results come as Barclays boss Antony Jenkins works to rebuild the bank's image following its alleged LIBOR rigging and mis-selling of payment protection insurance for which it agreed to pay a £290m fine to UK and US regulators.In a statement alongside the company's financial statement, Jenkins confessed 2012 was a "difficult year for Barclays and the entire banking sector" as a number of institutions were put under the microscope over interest rate rigging claims and faced the brunt of the economic crisis."The behaviours which made headlines during the year stemmed from a period of 20 years in banking in which the sector became too aggressive, too focused on the short-term, and too disconnected from the needs of customers and clients, and wider society," he said."Barclays was not immune from the impact of these trends, and we suffered reputational damage in 2012 as a consequence. Change is needed both in our industry and at Barclays."Jenkins took over the reigns as Chief Executive Officer in August from Bob Diamond, who stepped down in the midst of LIBOR affair. He said he plans to change the face of Barclays with the goal of making it the "Go-To" bank for stakeholders. "Our plan is built on a rigorous review of 75 distinct business units to determine not only their ability to generate an appropriate and sustainable return on equity, but also their strategic attractiveness, including their impact on Barclays reputation," he said."We expect to make good progress towards our financial commitments by 2014 and deliver them fully during 2015."The group will aim to cut total costs by £1.7bn to £16.8bn in 2015, including interim cost estimates of £18.5bn and £17.5bn in 2013 and 2014 respectively. It excludes 'one-time' costs to achieve the strategic plan of £1bn in 2013, £1bn in 2014 and £0.7bn in 2015, delivering a group cost to income ratio in the mid-50s in 2015.The bank also confirmed it was closing its Structured Capital Markets business, which helps clients avoid tax.Jenkins said the bank was now focused on a return of equity above cost of equity which is assumed to remain at the current 11.5% level. The group's return on average equity of came to 13.7% last year up from 10.4% the year earlier.Operating expenses fell 1.0% to £7,2bn, driven by a 3.0% reduction in total performance costs to £1.6bn including a £210m increase in deferred bonus chargesAnalysts at Investec reacted to the results, highlighting the bank's strategy for its international investment bank Barcap."As such, looking through management jargon, it is surely little wonder that Bob's successor, Antony Jenkins, rightly plans to secure, and build upon the improving shareholder economics of Barcap. Shredding? Don't make me laugh! Barclaycard £1.5bn (+25% year on year) was strong," it said. Barclays held a conference call with Finance Director Chris Lucas shortly after releasing its interim statement. Lucas said 1,600 of the 1,800 redundancies of the bank's investment arm have already been made. He also refuted claims that the LIBOR rigging fine encouraged customers to shift their current accounts. His comments came despite data published alongside the annual results which showed a fall in the number of current accounts to 11.7m from 11.9m.Lucus has decided to retire but remain in his role until a successor takes over. He is currently under investigation by the Financial Services Authority for the way disclosures were made during the 2008 fundraising that helped the bank avoid a taxpayer bailout. Most recently the bank has been accused of misleading shareholders over a £3.0bn investment. In 2008 the bank said Manchester City F.C. owner Sheikh Mansour had agreed to invest the funds to avert a taxpayer bailout - but the money actually came from Abu Dhabi's government, according to a BBC Panorama investigation.Barclays was rescued in 2008 by £7.0bn worth of new investment, most of which came from Qatar and Abu Dhabi. Almost half of the amount was supposed to have come from Mansour but Barclays has confessed it was told the investor changed shortly before shareholders backed the deal.It then allegedly hid the change in the fine print of the disclosure issued the shareholders.Despite the latest hit to the bank's reputation, Lucus said this year has taken off to a good start with one of his "most optimistic statements" since taking up the post just before the 2007 credit crunch. RD