Barclays plans $1.25 billion in cost savings, considering layoffs for up to 2,000 jobs

Barclays, one of the leading British banks, is reportedly exploring strategies to save as much as £1 billion, with the possibility of cutting up to 2,000 jobs, particularly in the bank's back-office operations.

The bank's management, led by Chief Executive C.S. Venkatakrishnan, known as Venkat within the institution, is currently evaluating proposals aimed at enhancing profitability. If these plans are fully implemented, it could result in a reduction of 1,500 to 2,000 jobs.

The potential job cuts are anticipated to predominantly affect Barclays Execution Services, referred to as 'BX'. These reductions are part of an overarching objective to trim expenses by up to £1 billion across the entire group over the span of several years.

While Barclays has previously taken measures to reduce costs by cutting bonuses and jobs in its retail and investment banking sectors, the focus on BX and the associated potential savings has not been reported until now.

Established in 2017 to consolidate support functions for the bank's primary business divisions—UK retail banking and international operations—BX was designed to eliminate redundancy and implement post-crisis risk management rules.

Barclays' £1 billion cost-saving goal represents approximately 7% of the bank's underlying annual operating expenses, which amounted to £15 billion in 2022.

The discussions regarding BX's headcount are still ongoing. It is also expected that Barclays may opt to prioritize layoffs in other areas. The headcount at BX has seen significant growth in recent years, rising from 20,000 at the end of 2017 to approximately 22,300 at the end of 2022, constituting over a quarter of Barclays' total staff, as per regulatory filings.

Simultaneously, annual staff costs at BX have surged from £1.8 billion to £2 billion. Venkat, facing pressure to enhance Barclays' declining book value, is expected to unveil a fresh strategy in an investor presentation in February 2024.

Since assuming the role of CEO, Venkat has dealt with the aftermath of a trading blunder that incurred substantial losses for the bank. Additionally, he is contending with a talent exodus in Barclays' investment bank, posing challenges in competing with European rivals such as Deutsche Bank, BNP Paribas, and UBS.

Barclays' share price has witnessed a 26% decline since Venkat assumed the position on 1 November 2021, in stark contrast to Deutsche Bank's stable shares and HSBC's 37% gain.

In terms of actions, managers within BX have reportedly operated with frozen budgets this year and have been informed of the necessity to reduce costs in 2024.

Venkat signaled on 23 October 2023, that Barclays would undergo further restructuring in preparation for the pivotal February 2024, presentation, viewed as a crucial opportunity for the bank to convince shareholders of its plan to uplift its valuation.

Barclays has been collaborating with Boston Consulting Group on a comprehensive strategy review, focusing on determining areas for investment, reduction, or potential sale. Additionally, the bank has been exploring options for its payments business since July 2023.