London: Barclays' new boss is expected to shrink his investment banking and European operations and stop activities that could damage the troubled British bank's reputation as part of a revival plan to be unveiled on February 12. Chief Executive Antony Jenkins, a retail banker who was picked at the end of August to run the bank after a string of problems, is expected to tell investors he will cut some business lines and axe about 2,000 investment bank jobs to slash up to 2 billion pounds of annual costs.
He will also promise profound change in standards and culture, criticised as too lax after a $450 million fine for rigging Libor, the mis-selling of products to millions of customers and investigations into whether Barclays provided enough disclosure in fundraisings from Middle East investors.
"The key challenge is how does Barclays improve return on equity at the same time as reducing the risk profile of the group," said Gary Greenwood, analyst at Shore Capital.
"Barclays may well be a smaller business. The issue is whether management can shrink the group's capital requirements while maintaining or growing profit."
Jenkins, 51, will unveil his grand plan shortly after the bank releases 2012 results, which will show the scars of regulator fines and provisions for mis-selling, offsetting a decent underlying performance in its core UK banking business. He expects "Project Transform" will take five to 10 years to rebuild his bank, and has told staff they should leave if they do not want to sign up to the new standards.
Jenkins will keep Barclays' investment bank, which contributes more than half of group earnings, but could cut its assets and pull back from areas like equities and advisory business in Asia. Up to 10 per cent of its 23,300 staff could go, and Jenkins is expected to cut pay across the unit.
Costs across the group are expected to be cut by between 1 billion and 2 billion pounds, or 5-10 per cent of its 19 billion pound cost base, analysts estimate. Barclays has said it will close a profitable but controversial tax advisory business as part of the attempt to clean up. It could also retreat from areas like the trading of agricultural commodities.
The bank's capital strength will be under scrutiny as tougher new UK and global regulations loom, but Barclays could reduce any increase in its risk-weighted assets by some 50 billion pounds by taking mitigating action, according to Andrew Lim, analyst at Espirito Santo.
Barclays will report a 2012 adjusted pretax profit of 7.1 billion pounds, up 27 per cent from 2011, according to the average of 18 analysts polled by Thomson Reuters. Including mis-selling provisions, its pretax profit would be 4.7 billion pounds, near flat on its comparable basis figure for 2011.
Its annual statutory pretax profit, which includes those provisions and also movement in the value of its own debt, will plunge two-thirds from 2011 to 1.9 billion pounds, according to the average of 10 analysts' forecasts.