The big Barclays distraction

Good afternoon. This is your midday market update from City AM.

Barclays looked set to follow the Wall Street trend as it kicked off European bank earnings this morning.

A consensus miss at the investment bank immediately grabbed the attention of investors following its third-quarter trading update. The division - the central engine behind the group - scored £3.1bn in revenue, compared with forecasts of £3.3bn.

Trading desks made hay on the market volatility caused by the US-Iran war with a 47 per cent jump in income to £1bn. That’s higher than the average jump in equity trading revenue on Wall Street and around the same rate of growth as JP Morgan’s traders.

But as with JPM, Barclays posted a headline profit miss after the investment banks cameup short. Both blamed a downturn on their fixed income desks, which have taken a beating following a bond market rout. 

In light of Barclays chief CS Venkatakrishnan’s longer-term plans for a strategic overhaul of the investment bank, the update left hacks loaded with questions for the bosses’ media round. 

That was until we saw slide 10 of the results presentation. Barclays said it expects to have wielded the axe on some 5,000 employees by the end of the year - a detail notably absent from the third-quarter update it gave markets. The cull will affect around five per cent of its global workforce.

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Finance boss Anna Cross said the cuts were part of plans to save more than £1.1bn come 2027.

It certainly threw a spanner in the works for investors. Barclays shares dropped 1.8 per cent at the open but as  the cuts hit headlines shares quickly flipped into the green as the promise of cost-cutting drew attention away from the investment bank’s woes. By mid-day they had slipped back into red as investors digested the mixed bag.

AI is driving the “bulk of the efficiency gains,” the bank’s boss, known in the industry as Venkat, said. He added it has “an important role to play and may have a more important role to play in the future”.

Venkat said the use of AI in the firm was “the icing on the cake, not the cake”.

Barclays is, of course, not the first bank to announce a swathe of AI-fuelled job cuts, nor is it the first to be rewarded by investors for doing so. 

Its FTSE 100 peer Standard Chartered said in May it would slash more than 7,000 roles as it steps up its AI use. The bank’s stock closed the trading session following nearly three per cent higher. HSBC has also put a raft of roles in its UK wealth division on the chopping block as it uses AI to slash costs.

It suggests an inflection point has finally been reached. Top bosses have remained cagey over the specific effects AI will have on their units. Scan back to the beginning of the year, JP Morgan boss Jamie Dimon said AI would reduce jobs “down the road”.

HSBC’s Georges Elhedery said there would be an impact on jobs in the future. 

In May, Venkat said AI was helping things get “a little more efficient in certain parts,” adding a “fundamental impact” was coming, but he didn’t see it “yet”. 

All he needs to do now is turn to page 10 of his slide deck. 

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