Barclays: Rolling in the Deep With Spending Cuts
The cost cutting measures are not over for British bank Barclays PLC (NYSE:BCS). Ashok Vaswani, head of retail and business banking at Barclays, admitted more changes would take place as the bank looks to restructure, and decrease expenditures.
Vaswani said in an interview with Financial Times that, “I’m a firm believer that branches will survive but the format — where they are located and what happens in them — will change. There is no question there will be shrinkage.” Barclays is attempting to decrease annual spending by 1.7 billion pounds ($2.74 billion). This is a 10 percent decline from current levels. Barclay’s retail banking business has become a target of the plan, because of its costly nature. The cost-to-income ratio is reported to be 66 percent, Vaswani wants to see it in the “mid-50s.”
Already, the bank has taken steps to reach this goal. Last week, Barclays announced it was cutting 1,700 jobs. “As a result of technological changes, we will be able to provide better service for our customers with fewer staff in our branches. Today we have outlined a voluntary redundancy scheme for those colleagues who are interested,” Barclays said in a statement.
On November 15, Douglas Blakey, editor of Retail Banker International, told BBC Radio 4 that last week’s job cuts by Barclay’s were “just yet another cut, I’m afraid.” He enumerated the previous staff reductions by the bank this year, and highlighted that HSBC Holdings plc (NYSE:HSBC) taken similar steps in recent years as well. The reductions, Blakey believes, are part of an “on-going trend.”
The trend is sweeping across England with banks closing in small rural outposts. Carol Cropley discussed how the closure of her personal banking center, Santander, affected her life with the Telegraph. Telephone banking was frustrating, and the weak cell phone signal she receives at home made online banking nearly impossible. “As more and more banks are closing local branches, and the cost of petrol continues upwards, internet banking is a necessity for rural communities and businesses. But it increasingly feels like our needs are not considered at all,” Cropley said.
Technology will play an important role in Barclays’ new scheme. Vaswani told Financial Times there were plans for “automating the hell” out of transactions, such as money transfers, and bill pay. Barclays is trying to win back customers as well, by introducing a new overdraft fee structure — something Vaswani is committed to, even if it loses money in the short term. ”I would say this wasn’t a mistake for Barclays, it is a business necessity,” Blakey said. Barclays is looking for a way to “make retail banking pay” as part of the bank’s obligation to shareholders. Blakey agreed that customer interaction with banks is changing, and banks need to find the “right size” depending on location and services needed.