8:13 a.m. | Updated
LONDON – Barclays announced a major restructuring that will eliminate 3,700 jobs and close several business units, as the bank reported a big loss in the fourth quarter of 2012.
The overhaul of its operations comes after a series of scandals at the bank, including the manipulation of benchmark interest rates, which led to the resignation of the firm’s former chief executive, Robert E. Diamond Jr.
In a bid to reduce its exposure to risky trading activity, Barclays plans to close a number of operations in Europe and Asia, including a tax-planning unit that has been criticized for tarnishing the firm’s reputation.
“There will be no going back to the old way of doing things,” the chief executive, Antony P. Jenkins, told reporters at a news conference in London on Tuesday. “We will never be in a position again of rewarding people for activities inconsistent with our values.”
Despite the revamp of its operations and a new emphasis on values, the bank plans to retain the majority of its investment banking unit, particularly its operations in Britain and the United States. The division generated roughly 60 percent of the bank’s adjusted pretax profit in 2012.
Barclays will close four business divisions, while another 17 units will either be closed, sold or pared back in response to subdued market activity, Mr. Jenkins said. In total, the expected layoffs across the bank’s operations represent around 3 percent of the firm’s global work force.
The investment banking division is to be among the hardest hit, where about 1,800 employees are expected to be laid off. The job cuts will primarily fall on the bank’s Asian and European equities divisions, as well as its agricultural commodities trading operations. Almost 90 percent of the reductions already have been made, according to Christopher G. Lucas, the bank’s departing chief financial officer.
Mr. Jenkins refused to comment specifically on the position of Rich Ricci, the head of Barclays investment banking, whose name has surfaced in the inquiry into the bank’s role in the rate-rigging scandal.
“No one can predict the future, but I am confident in the team around me,” Mr. Jenkins said. “Who knows what could happen in a year’s time.”
The restructuring plan includes an additional 1,900 job cuts in the bank’s European retail and business banking unit, where Barclays plans to close roughly 30 percent of its Continental branch network.
The reductions have been focused in areas where Barclays does not compete globally with other international banks or where the firm could experience reputational damage like the recent rate-rigging scandal and the inappropriate sales of loan insurance to customers.
“Not much of this is surprising,” said Ian Gordon, a banking analyst at Investec in London. “They are not removing any of the material activities from the investment bank.”
The recent scandals that have engulfed the bank weighed down the firm’s fourth-quarter earnings.
Barclays posted a net loss of £835 million ($1.3 billion) in the last three months of 2012, compared with a profit of £356 million in the period a year earlier.
The results were hampered by the need to set aside additional capital to compensate costumers who were inappropriately sold loan insurance and for small businesses that were improperly sold complex interest-rate hedging products. Barclays also took a charge against the value of its own debt.
Excluding the adjustments, the bank’s pretax profit for the fourth quarter would have been £1.1 billion, almost double the amount in the period a year earlier.
For 2012, the bank reported an annual net loss of £1 billion, compared with a £3 billion profit for 2011. The annual loss resulted from provisions to cover legal costs related to the rate-rigging scandal and other improper activities.
The bank added that it would reduce annual costs by around 10 percent, to £16.8 billion, by 2015. Its share price rose almost 6 percent in afternoon trading in London on Tuesday.
Barclays said it had reduced bonuses across its operations by 16 percent for 2012, compared with the previous year. In its investment banking division, total bonuses fell 20 percent, with the average bonus in the unit standing at £54,100, a 17 percent reduction, according to a company statement.
The bank added that it had cut compensation awards because of risks facing several business units, including the rate-rigging scandal.
In a settlement with American and British authorities in June, Barclays agreed to pay fines totaling $450 million after some of its traders manipulated the London interbank offered rate, or Libor, for financial gain. Some of the firm’s managers also altered the rate to portray the bank in a healthier financial position than it actually was.
The investment banking division reported a pretax profit of £858 million in the fourth quarter, compared with a pretax profit of £267 million in the fourth quarter of 2011. Pretax profit at the bank’s retail and business banking unit rose 17 percent, to £732 million, while pretax profit in its corporate banking division almost tripled, to £107 million.
Mr. Jenkins acknowledged that some of the firm’s past actions had fallen short. He added that the investment banking division would remain at the heart of the firm’s future operations, though wrongdoing would not be tolerated.
“The old ways weren’t the right way to behave nor did they deliver the right results,” Mr. Jenkins said. “Individuals must take responsibility for their own behavior.”
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DealBook: Barclays to Cut 3,700 Jobs in Overhaul
