Barclays to cut 5,000 jobs as it uses AI to reduce costs
Barclays has announced it will cut around 5,000 jobs, or 5 per cent of its workforce, this year as part of a cost-cutting drive that relies on artificial intelligence and automation. The bank reported a 12 per cent rise in third-quarter profit but missed analysts' forecasts due to weak fixed income
Barclays has announced it is cutting around 5,000 jobs, or 5 per cent of its workforce, this year as it uses technology such as artificial intelligence (AI) to slash fixed costs and improve returns. The cuts were revealed as the bank reported third-quarter profit of £2.3 billion (HK$24.12 billion), up 12 per cent from a year ago but undershooting analysts’ forecasts as its fixed income trading business underperformed.
“I am disappointed, and you can be sure this will get my attention,” Chief Executive C.S. Venkatakrishnan said about the bank’s traditional strength of fixed income trading, blaming a volatile quarter and weak trading in rates and credit products in particular. The bank said it had taken a further £201 million in “structural cost actions” in the third quarter as part of a longer-term plan to reduce expenses like staff costs through greater use of technology.
Around 60 per cent of the overall job cuts will affect staff in support functions such as developers, Chief Financial Officer Anna Cross told reporters, in one of the clearest signs yet from a big bank of how AI enables firms to reduce headcount in such roles. Cross said 1,000 roles have already gone, with the remainder to be cut by the end of the year. “The cuts illustrate just how significantly AI and automation could reshape the banking industry over the next few years,” said Will Howlett, financials analyst at fund management business Quilter Cheviot.
Barclays shares slipped 0.1 per cent, outperforming other lenders. The bank’s shares have fallen 12 per cent so far this year, in line with European peers which have sold off after years of rallying as higher interest rates lifted profits. Shore Capital said in a note that the results were weaker than expected due to the disappointing performance by the investment bank.
Barclays is the first major European lender to report its quarterly earnings, with British banks’ results likely to be overshadowed by finance minister John Healey’s first budget on 28 October, where further taxes on banks may be levied. Healey has refused to rule out hiking taxes on banks’ bumper profits despite intensive lobbying by the industry, as the finance minister mulls higher taxes to help fund the Labour government’s policy agenda.
Barclays’ investment bank reported total income in the third quarter of £3.1 billion, lower than forecasts for £3.3 billion. The British lender saw income from fixed income trading slide 19 per cent to £1 billion, weaker than a 5 per cent drop among its US peers and worse than analysts’ forecasts for £1.3 billion. However, Barclays’ equities revenue rose 47 per cent, outperforming the average 37 per cent gain across the top five US players, according to a Reuters calculation from company statements.