Barclays’s bankers in Asia are feeling nervous. Talk of swathing job cuts in the coming weeks has many of them looking for a way out, say people familiar with their thinking.
Barclays plans to scale-back its 24-person strong India equities business and is mulling the sale of its Asian wealth management division, according to a variety of well-placed industry sources. Layoffs are most likely in cash equities and equities research across Asia, including Japan and areas of the region where the bank is sub-scale, they said.
One person familiar with the matter told FinanceAsia that more clarity on job cuts and the British bank's strategy is expected as early as next week. However, a Hong Kong-based spokeswoman for Barclays declined to comment when pressed on this.
The most recent, high-profile Barclays banker to walk is Didier von Daeniken, who had headed Barclays’s private banking business for Asia Pacific, Middle East and Africa. Standard Chartered said it hired him on December 15.
It remains unclear how deep the cuts in Asia will go. The Barclays spokeswoman said widespread talk within the bank that the bank will shutter its business in the region is untrue.
“We are constantly monitoring our opportunities in different geographies and businesses over the cycle. If any firm decisions are made, we will provide an update,” the spokeswoman said.
“Costs will be down. This will be the second year in succession, next year will be the third year in succession, any which way you measure it,” Tushar Morzaria, Barclays group finance director, told analysts on November 6.
Barclays had 18,200 full-time employees in the Asia Pacific region as of 2014, down from 18,500 in 2013 but up from 16,500 in 2012, according to its annual report. Its income from the region totaled £776 million in 2014, down from £1.28 billion in 2013.
About-face
Barclays is in the midst of a three-year cost cutting programme that entails eliminating 19,000 jobs worldwide or 14% of its staff. As part of this restructuring the bank said in May 2013 that it would cut 7,000 jobs within its investment bank by 2016.
That marks a major turnaround in Asia. Whilst US investment banks floundered in the wake of the 2008 global financial crisis, Barclays under the regional leadership of Robert Morrice went on the offensive. After buying the US arm of Lehman Brothers, it built out its investment banking and cash equities business across Asia and had a record year in the region in 2013.
Barclays hired what many in the industry dubbed a dream team of investment bankers including Matthew Ginsburg from Morgan Stanley in 2009, Ed King, Johan Leven, Peter Ding and Helge Weiner-Trapness. It is unclear if Barclays ever hit the financial targets it set for Asia but it certainly struggled as the US banks recovered and Chinese banks became more competitive.
That team of bankers has since been dismantled. Morrice retired in May 2014 and, according to his LinkedIn profile, is self-employed on a farm estate in southern England. Ginsburg also stepped down in May 2014, while Jason Rynbeck, vice-chairman of M&A for Asia-Pacific, left Barclays to join HSBC as its head of M&A for the region.
King, Leven, Ding and Weiner-Trapness have since started their own boutique investment banking advisory firm called Quintus Partners.
The rush to the door seems to have gathered new urgency ahead of Barclays's full-year earnings results and strategy update for investors due on March 1.
That is partly because any layoffs are likely to come ahead of bonuses being awarded -- usually in late February -- but is also because management has made it clear that the strategy has changed.
Barclays chairman John McFarlane said in July that: “The role of the network is to be precisely that, a network where its main role is to serve our major market clients internationally, and major international clients in our core markets.”
Barclays in Asia is less independent and instead of serving local clients its primary purpose is to help the clients of its core franchises in the US and Britain.
McFarlane added that parts of the network that no longer fulfilled their role or their potential needed to be scaled back or exited.
Barclays' equities trading share in Asia is outside of the top six, according to the latest survey by consultants Greenwich Associates. Only the top franchises are profitable in Asia and brokers fiercely compete for every percentage point of share, say industry sources.
However areas such as execution services will continue to be useful to other regions of the bank, the sources said.
Talk in the Corridors
As a result senior bankers at Barclays in Asia have been meeting with headhunters and a few managing directors are trying to move entire teams to other franchises, several recruiters for banks told FinanceAsia.
However, headhunters say it’s hard to place them.
Chinese brokers are reining in their international expansion plans after a volatile 2015 and in the wake of corruption probes. Japanese brokers are also more cautious overseas, unlike in 2008, whilst CIMB is in retreat and other mid-market players have closed their Asian equities divisions, including Samsung Securities, Standard Chartered, and Knight.
Barclays is not alone in seeking to cut costs. New York-headquartered Jefferies laid off just under 20 people in cash equities, or 5% of the team in Asia, in December.
At the time of the bank’s half-year earnings McFarlane said he was targeting a group cost:income ratio in the mid-50s. As of September 30 it stood at 64%.
The cost:income ratio in the investment banking side of Barclays is 81%.
Jes Staley, who joined the British bank on December 1 as group chief executive officer, has the experience to be able to reposition the investment bank, having previously been head of investment banking at JP Morgan.
Additional reporting by Richard Morrow and Ray Chan
