Barclays, the large British bank, will cut 5,000 jobs, about 5% of its total workforce, this year as it expands its use of AI (artificial intelligence). Developers are expected to be hit hardest by the cuts. Third-quarter results released alongside fell short of market expectations because of weak bond trading.
Barclays disclosed the job-cut plan on the 22nd (local time) as it released its third-quarter results. As part of a broad cost-cutting program, about 60% of the jobs being cut will come from support departments. The company gave as its reason, "because AI is raising employees' productivity." Barclays had already cut 1,000 jobs in the first half.
Barclays CEO (chief executive officer) CS Venkatakrishnan said, "We will use AI on a large scale, but AI is only the icing on the cake, not the cake itself."
Barclays spent £307 million (about 550 billion won) on restructuring in January-September this year. That is the total of job cuts, technology investment and business reorganization. The company projected that a further £300 million (about 530 billion won) will be spent by year-end. The decision is likely to heighten concerns that, as AI spreads, companies can run with far fewer people than now.
Third-quarter pretax profit was £2.3 billion (about 4.1 trillion won), up 12% from a year earlier. However, it did not reach the £2.42 billion (about 4.3 trillion won) the market had expected. Revenue rose 3% to £7.4 billion (about 13.1 trillion won).
Dragging down results was bond trading in the investment bank division. Bond trading profit fell 19% from the same period a year earlier, leaving investment bank income flat. The equities division was a different story. It posted its best quarter in more than 10 years, with revenue of £1 billion (about 1.8 trillion won). Barclays cited prime brokerage (comprehensive financial services for hedge funds) and equity derivatives investment as factors behind the nearly 50% jump in equities income.
Although CEO Venkatakrishnan has pushed to diversify the business, the results again showed that Barclays' report card is still heavily dependent on the investment bank. Venkatakrishnan also admitted that some interest rate and credit trading fell short of expectations. "Barclays has always been a company built on bonds," he said. "I am a bond man to the core, so I am very disappointed and will personally take charge of it."
Operating costs rose 6%. This was because the business grew and because changes to the compensation system for those handling core risk work led to additional pay for high performers. Barclays' share price fell 2% shortly after the open that day before recovering its losses.
In the banking sector, there are worries that, given how much profits have grown on high interest rates, the British government's budget due next week may include a bank tax increase. "Our position on the bank tax is very clear," Venkatakrishnan said, but added, "The chancellor and the government have important responsibilities to the public and must consider many issues."