Barclays shares soar as City welcomes job cuts
Friday 21 May 1999
The cuts in both the retail and corporate bank are the first fruits of the three-year cost-cutting drive announced at the time of the bank's last full-year results in March.
They come despite continued uncertainty about the post of chief executive as the bank searches for a replacement for Mike O'Neill, the American banker who was the bank's first choice for the job, but who quit on health grounds last month.
Barclays said the cost of redundancy payments would amount to pounds 400m, which will be taken as a one-off charge against the accounts this year. The bank said the cuts will result in annual savings of pounds 200m.
The 6,000 job losses announced yesterday follow the 250 jobs lost at Barclays Capital, Barclays capital-markets operations, in the wake of the Russian bond losses last autumn, and a further 1,100 losses at Barclaycard last year.
John Tyce, banks analyst at SG Securities, said yesterday: "When Barclays said they would cut costs no one was sure whether to believe them, because at the time they were not clear how they would do it. Now we know how they plan to do it, the share price has responded."
However, he pointed out that the move was long overdue. Most of the other major banks had already taken similar steps. High-street rival National Westminster Bank, for instance, is cutting 10,000 staff over two years - 25 per cent of its UK payroll.
Sir Peter Middleton, who last month took on the role of chairman in addition to the job of chief executive that he has been doing since Martin Taylor left last November, said that the bank was determined not to be left behind at a time of rapid change in the financial services industry.
"I am doing exactly what I said I would do. We are continuing to push the business forward," he said.
Sir Peter insisted that the cutbacks had been in the pipeline for four months and followed extensive consultation with unions. Most of the cuts will be in back-office processing and follow heavy investment in new technology and a shift from a regional management structure to one that is product led.
"This is the result of a careful process," he said. "You have to make sure you can identify the people and the costs which we can do without. The last thing we want to do is reduce our revenues."
However, the decision to move now will inevitably be seen as an attempt to take the wind out of the sails of the Royal Bank of Scotland, which has been lobbying City institutions to support a merger on the grounds that it is the only way that Barclays can be forced to cut costs.
Sir Peter insisted that the search for a new chief executive was progressing and that there was no way the bank was going to be bounced into a deal with RBS. Barclays recently turned down a request from RBS for a meeting to discuss the idea.
Sir Peter said: "We have a lot to do. We are a big bank and we have one of the best performing shares in the sector. Obviously you can see consolidation taking place.
"But we are more interested in getting it right than moving quickly. We want to do the right deal not a quick deal."
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