Barclays refuses to rule out job cuts as bad customer loans rise

Matthew Field 24 October 2023 6:19pm BST Barclays has refused to rule out job cuts as part of a sweeping cost savings plan to boost profits. The banking giant announced plans for a fresh

wave of cost cuts on Tuesday as it confirmed a drop in profits. Barclays made a pre-tax profit of £1.9bn in the three months to September, slightly ahead of market expectations but down 4pc

on the same period a year ago. An increasingly competitive savings market has hurt performance after it was forced to offer rates. At the same time, high interest rates across the economy

are also beginning to impact Barclays’ customers. The lender has set aside £433m to cover bad loans – up 14pc compared to last year. Barclays has already cut hundreds of staff this year in a

bid to trim costs, but chief executive CS Venkatakrishnan has now signalled the potential for further redundancies. He told journalists: “We always modulate the size of our workforce

everywhere in the world. That’s what we’ll continue to do. “I have said many, many times that we will give the details in February.” The update drove Barclays’ shares down by 6.5pc, while

also sparking a wider sell-off for other UK lenders such as Lloyds and NatWest. Gary Greenwood, an analyst at Shore Capital, said the sector-wide slump was “reflective of wider concerns that

bank net interest margins would come under pressure”. As part of its third-quarter results, Barclays trimmed forecasts for its net interest margin – a metric that measures the difference

between what it charges on loans to what it pays to savers. The bank said its net interest margin is likely to fall to between 3.05pc and 3.10pc in 2023, down from a high of 3.2pc

previously. Surging interest rates boosted bank earnings earlier in the year. However, political pressure to increase savings rates and better offers from rivals have forced major lenders to

improve their offers to customers, which is now eating into profits. Mr Venkatakrishnan, who is known as Venkat, said there was now a more “competitive environment for UK retail deposits”.

Mr Greenwood said: “The trend in the industry is that competition for deposits has been increasing. “There’s a couple of reasons for that. One is the Bank of England and regulators have

pushed the larger banks to increase the pass-through rate rises to customers. “But also you see National Savings & Investments (NS&I) put out some very attractive prices during the

quarter, so it’s possible that it distorted the market.” NS&I, which helps fund the Government, announced a series of market-leading savings offers this summer. It raised the rate on its

one-year fixed-rate “guaranteed growth bond” to 6.2pc in August, while its “guaranteed income bond” was set at 6.03pc – the best rates offered at the state-backed savings bank since 2008.

Mr Greenwood said: “The question would be whether this is a sector wide trend, that deposits are going elsewhere into things like National Savings & Investments, or whether it’s movement

within the sector, for example NatWest taking share from Barclays.” Elsewhere, Barclays said income at its investment bank fell by 6pc amid a slowdown in global dealmaking. Mr Greenwood

said: “If you’re an investment banker it’s a challenging market because markets have been weak. “You also have rising uncertainty around interest rates, so companies have been reluctant to

list, invest and raise money. That has meant dealmaking and fundraising for investment bankers has been quite disappointing in the past 18 months.” Earlier this month, Barclays’ former chief

executive Jes Staley was banned for life from holding senior positions in the City of London over his ties to late paedophile financier Jeffrey Epstein. He was fined £1.8m for a “lack of

integrity” in how he characterised the relationship, while Barclays said he would have to forfeit as much as £17.8m in deferred pay. Mr Staley is appealing the decision.