Bull Bear Report Jan 12 2011

Barclays Capital to Cut 2.4%, 600 Staff Worldwide

By kyle stock

Barclays Capital, the investment banking arm of Barclays PLC, plans to lay off 2.4%, or about 600, of its global staff this week, according to sources close to the matter.

The cuts will be spread across the globe and across job functions and seniority levels.

Barclays Capital, which has roughly 25,000 workers and is known as BarCap, has struggled in recent months with a dearth of deals and sluggish trading activity. In the third quarter, the unit posted 765 million pounds in pretax profit, its worst quarterly showing since early 2009. Its revenue in the three months was down 24% from the year-earlier period.

Early last month, the bank told hundreds of its U.K. employees that they would be cut via a consultation process, wherein a company is legally required to tell fired employees 90 days in advance of a layoff.

Meanwhile, in New York a BarCap employee said managers had booked a number of conference rooms for a round of announcements earlier this week. Those reservations were canceled when a snowstorm dumped about nine inches of snow on Manhattan Tuesday night and Wednesday morning.

Another, more senior source at the bank said this morning that the cuts would be announced by the end of the week.

The layoffs are a dramatic reversal in strategy. In the year ended September 30, Barclays Capital added 2,000 workers, specifically building out its sales and trading desks. The bank has also been hiring in Canada and building out its wealth-management team in the U.S.

The hiring produced results, as Barclays garnered a 25% increase in investment banking revenues in 2010, one of the biggest gains of the year, according to data from Thomson Reuters. However, the firm still only reached No. 8 on a ranking of banks by fees and the company's trading and principal investment operations slumped dramatically.

A pair of UBS analysts released a report early this month saying restructuring is due at Barclays. The Jan. 1 start of Robert E. Diamond Jr. as CEO presents a propitious time to shrink the institution, they argued.

They wrote: "…only the man who built BarCap into such a dominant part of the group has the mandate within Barclays to rebalance the group away from the investment bank."

Some other Wall Street giants find themselves in a similar situation. Morgan Stanley, for example, added almost 2,100 workers in the year-ended Sept. 30 and finished the year on top of many league tables. But the business boost wasn't cheap. The firm has frozen all hiring in its i-banking unit and plans to withold bonuses altogether from its subpar employees.

Bank of America, meanwhile, has laid off about 400 people in its investment banking and capital-markets division.

Nomura analyst Glenn Schorr cited swelling headcount last month when he cut fourth-quarter earning estimates for both Goldman Sachs and Morgan Stanley.

Write to Kyle Stock

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