Barclays said that it is eliminating about 5,000 jobs, or 5% of its staff, this year in order to reduce fixed costs and increase returns through the use of technology like artificial intelligence.
Barclays’ third-quarter earnings of £2.3 billion ($3.08 billion), up 12% from the previous year but falling short of analysts’ projections due to its fixed income trading business’s poor performance, were disclosed along with the job layoffs.
Regarding the bank’s customary strength in fixed income trading, CEO C.S. Venkatakrishnan stated, “I am disappointed, and you can be sure this will get my attention,” attributing it to a tumultuous quarter and poor trading in rates and credit products in particular.
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The bank reported that it had taken an additional £201 million in “structural cost actions” in the third quarter as part of its longer-term strategy to lower costs, such as personnel costs, by using more technology.
CFO Anna Cross told reporters that over 60% of the total job cutbacks will affect employees in support roles like developers. This is one of the most obvious indications yet from a major bank of how AI is helping businesses decrease headcount in such roles.
Cross stated that 1,000 positions have already been filled, and the remaining ones will be eliminated by year’s end.
According to Will Howlett, a financial analyst at Quilter Cheviot, a fund management company, “the cuts show just how significantly AI and automation could reshape the banking industry over the next few years.”
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As automation has a greater influence on employment, businesses all around the world, including the IT behemoth Microsoft and HSBC, have announced layoffs this year.
Shares of Barclays fell 0.1%, outperforming other lenders. Following years of soaring as higher interest rates boosted profitability, the bank’s shares have dropped 12% so far this year, following in the footsteps of their European counterparts.
In a note, Shore Capital stated that the investment bank’s poor performance was the reason why the results were worse than anticipated.
Budget countdown begins.
Barclays kicks off European bank earnings season as the first major lender to report, but its results, like those of other British banks, may be eclipsed by John Healey’s first budget as finance minister on October 28. That budget could bring additional taxes on the sector.
Despite heavy lobbying by the banking industry, both publicly and behind closed doors, Healey has not ruled out raising taxes on banks’ large profits in recent months.
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He is weighing higher levies to help fund the Labour government’s agenda, as rising borrowing costs put pressure on public finances.
Mixed quarterly results for banks.
The banks say they already face heavier taxation than their counterparts elsewhere and warn that an extra levy would restrict how much they can lend.
Barclays’ investment bank brought in £3.1 billion in third-quarter income, short of the £3.3 billion analysts had expected.
Results from its Wall Street competitors earlier this month highlighted how unpredictable investment banking revenue can be: dealmaking cooled, and fixed income desks fell short, while equities trading alone kept up the strong pace of the year’s first half.
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Equities were a bright spot for Barclays, where revenue jumped 47%, ahead of the 37% average gain at the five largest US banks.
Fixed income was the weak point, though. Revenue from that business fell 19% to £1 billion, a steeper decline than the 5% drop seen at US rivals and below the £1.3 billion analysts had predicted.
