Barclays urged to shed investment arm

MARTIN TAYLOR, chief executive of Barclays, has admitted he is under pressure from shareholders to scrap the banking group's investment banking arm, Barclays Capital.

"Clearly Barclays Capital is doing immense damage to the valuation of the group. That is something we are very concerned about," Mr Taylor said.

Shareholders are increasingly agitated about the impact on Barclays' share price of doubts about Barclays Capital, which lost pounds 250m in the rouble crisis. Investors complain it is dragging down the value of what is otherwise a good retail business.

Mr Taylor said he did not wish to be rushed into a decision. "One does not want to throw the baby out with the bath water. I take the message from the stock market very seriously, but some investors are in a state of sheer panic. I think everybody has to calm down a little," he said at the weekend.

But he conceded the bank was considering which areas of investment banking it should phase out. Two divisions of Barclays Capital - emerging markets and proprietary trading - are likely to be scaled back almost immediately. The investment bank's capital base will also be slowly reduced.

Mr Taylor's comments add to mounting evidence of the financial damage wrought on banks by the world's financial crisis. Merrill Lynch, the giant US bank, is expected to announce worldwide job losses of more than 1,000 next week, including at least 100 in London, when it completes a review of its cost base. ING Barings is already cutting 1,200 staff, or 12 per cent of its workforce. There were also reports from Switzerland yesterday that UBS and Credit Suisse Group may cut the number of jobs at their respective Warburg Dillon Read and Credit Suisse First Boston investment banking arms in London.

UBS spokesman Daniel Kuenstle said: "If the decline is protracted, further corrections in the number of employees may be necessary."