COMPANY OF THE WEEK: BARCLAYS
Sunday 23 May 1999
The shares rose 4 per cent on the bank's first strategic decision since Michael O'Neill resigned in April. He was the third chief executive in six months, and his departure due to ill health spurred speculation the bank was vulnerable to takeover.
Barclays, which is still looking for a new chief, will take a charge of pounds 400m this year to cover the cost of the job cuts in its retail and corporate banking operations - mainly administrative staff. The bank said the cuts, a mixture of attrition and dismissals, would save it pounds 200m a year.
Since the start of April, the stock has fallen on concern the bank lacks a leader who can staunch losses in investment banking and emerging markets. Barclays sold its equities business at a loss in 1997.
Job cuts should help Barclays lower its ratio of costs to income from about 55 per cent, bringing it in line with Britain's most efficient banks such as Bank of Scotland, said Michael Trippitt, analyst at Schroders Securities.
Barclays is already more efficient than some rivals. Even so Mr Trippitt said "they're running up a down escalator to achieve the cost benefits" since the charges would not be outweighed by savings until 2001. Barclays will take about a third of the charge this year.
Sir Peter Middleton, Barclays' chairman, said the job cuts were the result of an 18-month review of the bank's businesses. He would not rule out further cuts and said the reductions would be evenly spread throughout all the operations.
"The announcement is very sad, but on a business level this is absolutely essential," he said. "This is to produce a simpler structure for people to bank with us and reduce costs."
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