Barclays said cutting 1,000 jobs, about 230 eliminated in Asia

Barclays Plc Chief Executive Officer Jes Staley has started a fresh round of cuts at the investment bank, affecting staff in New York, London and most deeply in Asia, according to a person with knowledge of the matter. 

PHOTO: REUTERS

JAN 21, 20168:40 AM

[LONDON] Barclays Plc Chief Executive Officer Jes Staley has started a fresh round of cuts at the investment bank, with plans to eliminate more than 1,000 jobs worldwide and exit several Asian countries, people with knowledge of the matter said.  

The UK bank plans to cut about 230 jobs in the Asia-Pacific region, including winding up its cash equities business in the region, one of the people said, asking not to be identified because the decision isn’t public.

It will exit operations in Australia, Taiwan, South Korea and Malaysia and plans to maintain offices in Hong Kong, China, Japan, Singapore and India and keep its prime brokerage and derivatives business in Asia, the person said. 

Mr Staley, a former JPMorgan Chase & Co banker who took over last month, is seeking ways to boost earnings growth and restore investor confidence by focusing on the bank’s most profitable businesses. He and Chairman John McFarlane are scheduled to present a broader strategic update alongside the bank’s full- year results on March 1.  

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A spokesman for Barclays in London declined to comment. The Financial Times reported earlier that the company will cut about 1,000 jobs.  

The bonus pool for the investment bank may be cut by at least 10 per cent from the previous year, one of the people said. The bank, which hasn’t made a final decision on compensation, plans to pay bonuses in March, later than the usual mid-February timing, according to a separate person. 

The investment bank’s bonuses fell 24 per cent to 1 billion pounds (S$2 billion) in 2014 from 1.3 billion pounds in the previous year, according to the bank’s annual report. Total compensation costs for the division fell 9 per cent to 3.6 billion pounds from 4 billion pounds over the same period. 

Barclays fell 4.1 per cent to 182.05 pence in London on Wednesday, tracking a global rout in equity markets and extending its decline to 17 per cent so far this year. The stock lost about 10 per cent in both 2014 and 2015.

Mr Staley was hired as CEO after McFarlane fired Antony Jenkins over the perceived slow pace of restructuring. 

Mr Staley is the latest CEO to deepen cuts at its securities units as banks shrink to restore profit growth amid tougher capital rules and a cooling global economy. Morgan Stanley CEO James Gorman said this week he was “effectively done” with about 1,200 job reductions in fixed-income trading after concluding the outlook for the business is poor.  

At Deutsche Bank AG, co-CEO John Cryan plans to eliminate about 9,000 jobs on a net basis by 2018, while Standard Chartered Plc CEO Bill Winters plans to cut 15,000 jobs to help save US$2.9 billion by 2018.  

The Barclays CEO extended a hiring freeze indefinitely in December after discovering the bank had only cut about 3,000 positions since 2012 because it continued “hiring tens of thousands of people every year” during an earlier job-reduction programme. 

While the securities unit, headed by Tom King, contributes about a third of the bank’s revenue, it has the lowest profitability of four units with a 2.7 per cent return on equity in 2014.  

“Our focus is on the US and the UK with a global network that’s right-sized and that will be measured on profitability and returns,” Mr King said of his strategy at a conference in September. “But all the time we’re monitoring our geographies, we’re monitoring our products, and we’re making adjustments.”

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Bank of China targeted by US for money-laundering controls

Bank of China Ltd must boost its money-laundering protections in the US in response to a regulator's enforcement action that cited deficiencies involving one of the world's biggest lenders. 

PHOTO: REUTERS

JAN 21, 20168:09 AM

[WASHINGTON] Bank of China Ltd must boost its money-laundering protections in the US in response to a regulator's enforcement action that cited deficiencies involving one of the world's biggest lenders.

The yet-to-be-disclosed case was brought by the US Office the Comptroller of the Currency, according to a copy of the regulator's order obtained by Bloomberg News. The OCC routinely leaves a bank's specific transgressions out of enforcement actions, so the agreement doesn't detail what Bank of China's US operations did wrong. The regulator hasn't imposed a fine.

Still, the action adds to troubles for the Beijing-based lender. Last year, prosecutors in Italy began pursuing Bank of China officials on accusations they helped move billions of dollars for clients involved in counterfeiting and prostitution.

In the OCC action, which was signed last month by Chen Xu, head of the bank's New York branch, the lender's US division agreed to fix policies for finding and reporting suspicious behavior among its customers, keep better track of currency transactions and limit its vulnerability to financial crimes.

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Bryan Hubbard, an OCC spokesman, confirmed the enforcement action but declined to comment on what the agency found wrong at the bank or whether any further consequences could result.

Requests for comment to Bank of China about the OCC agreement and the other allegations the lender is facing were directed to Brett Philbin, an outside spokesman at Edelman for the bank. Mr Philbin didn't respond to requests for comment.

'STRONG MESSAGE'

"Any enforcement action is a strong message to an institution," said Robert Serino, a partner at BuckleySandler LLP in Washington, who formerly ran the OCC's enforcement and compliance division. It means the OCC either couldn't get the bank to fix its controls internally, or whatever the agency discovered was so serious it needed a swift, higher-level response, he said.

Formal agreements like this aren't the most stringent action the agency can take, but they sometimes develop into tougher punishments - even financial penalties - if the firm's response doesn't satisfy the regulator, according to Serino.

Separately, the Chinese bank has been battling a judge's contempt finding in a civil case in New York. US District Judge Richard J. Sullivan in Manhattan said last year the bank must produce information on its clients accused in a legal fight over counterfeiting luxury goods.

The bank had argued that could violate China's customer-secrecy practices, according to a court document. A filing on Wednesday showed the bank yielded to pressure from Judge Sullivan and said it delivered documents responding to the subpoenas.

Judge Sullivan's order in November cited the bank's "refusal to comply with US law, while it continues to receive the benefits attendant to its banking activity in the United States," and he said the bank was "flouting" the court's orders. Failing to meeting Judge Sullivan's order, which had a deadline last week, meant a fine of US$50,000 a day.

Lawyers for the bank said in Wednesday's court filing that Bank of China has now complied with the court orders with "all non-privileged documents" it could locate and believes the contempt finding is no longer valid, and that it shouldn't owe any sanctions payments.

Systemically Important Bank of China has global assets of about US$2.5 trillion and is on the Financial Stability Board's list of systemically important institutions. Its five US branches have about US$63 billion in assets, according to government records, and largely serve Chinese companies.

It's China's "most international and diversified bank" - according to documents it filed with US regulators - and is still majority-owned by the government.

Bank of China's global reach was built over a century, from its one-time status as the country's central bank to its role managing China's foreign- exchange operations. It listed as a public company in 2004 and bought a new office tower near Manhattan's Bryant Park last year.

In July, another giant, state-owned Chinese bank, China Construction Bank Corp, faced an enforcement action from the Federal Reserve similar to Bank of China's OCC action. The Fed ordered the lender to tighten the money-laundering controls in its New York branch.

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How much will markets fall? Top investors see no bottom yet

Investment managers are warning that markets probably have further to fall as China's growth slows, oil prices plunge and central bankers lack tools to prop up economies. 

PHOTO: BLOOMBERG

JAN 21, 20168:03 AM

[LOS ANGELES] Investment managers are warning that markets probably have further to fall as China's growth slows, oil prices plunge and central bankers lack tools to prop up economies.

The Standard & Poor's 500 Index will drop another 10 per cent to 1,650 and oil could fall as low as US$20 a barrel as investors flee for safety, according to Scott Minerd, chief investment officer of Guggenheim Partners. Jeffrey Rottinghaus, whose T. Rowe Price mutual fund beat 99 per cent of rivals over the past year, said stock prices could fall another 10 per cent as the U.S. economy slips into a mild recession.

"I expect a protracted decline in the S&P 500," Jeffrey Gundlach, co-founder of DoubleLine Capital, said in an e-mailed response to questions. "Investors should sell the bounce-back rally which could come at any time."

The S&P 500 fell as much as 3.7 per cent Wednesday, the most since August, before partially recovering to close at 1,859.33, down 1.2 per cent. All 30 members of the Dow Jones Industrial Average were below prices at the beginning of the year, with the index down 1.6 per cent for the day and 9.5 per cent since Dec 31. Oil fell 6.7 per cent to US$26.55, down 28 per cent year-to- date.

"Excessive risk exposure is adding to the selling pressure," Mr Gundlach said. "Today's plunge into the lows looked like a margin call liquidation type of event." Mr Rottinghaus, manager of the US$203 million T. Rowe Price US Large-Cap Core Fund, said "industrials and commodities have been in a recession for at least six months" in the US.

 "What we are trying to figure out is how much that bleeds into the consumer side of the economy," he said in an interview.

WAITING FOR A CATALYST

Russ Koesterich, global chief investment strategist at BlackRock Inc, said there needs to be a fundamental catalyst to signal a market bottom, whether it comes from corporate earnings, economic data or an improvement in China.

"You need to have some stabilization of fundamentals to give people conviction this has gone too far," Mr Koesterich, whose firm is the world's largest money manager, said in an interview. "Certainly you are getting closer to capitulation. The magnitude of the drop suggests that."

Hedge fund manager Ray Dalio said global markets face risks to the downside as economies near the end of a long-term debt cycle. The Federal Reserve's next move will be toward quantitative easing, rather than monetary tightening, the founder of Bridgewater Associates said in an interview with CNBC from the World Economic Forum in Davos. That won't be easy, because rates are already so low, he said.

RISKS TO DOWNSIDE

"When you hit zero, you can't lower interest rates anymore," Mr Dalio said, according to a transcript of the interview. "That end of the long-term debt cycle is the issue that means that the risks are asymmetric on the downside because risks are comparatively high at the same time there's not an ability to ease." The rout in global stocks is being fueled by investors seeking to reduce leverage as central bank run out of options to prop up economies, according to Janus Capital Group Inc.'s Bill Gross.

"Real economies are being levered with QEs and negative interest rates to little effect," Mr Gross, who manages the US$1.3 billion Janus Global Unconstrained Bond Fund, said in an e-mail responding to questions from Bloomberg. "Markets sense this lack of growth potential and observe recessions beginning in major emerging-market economies."

While overseas economies are wobbling, the U.S. remains an island of stability, according to money managers such as Omar Aguilar, chief investment officer for equities at Charles Schwab Corp.

A STABLE ECONOMY

"This is a financial crisis and not an economic crisis," Mr Aguilar said during a conference call. "The US economy is stable."

Data on the housing market, unemployment and government spending still support US gross domestic product growth, Mr Aguilar said. 

Oil markets will rise later this year when supply drops in response to current low prices, according to Mihir Worah, co-manager of the US$89.9 billion Pimco Total Return Fund.

"We continue to expect oil markets to balance in the second half of the year, and expect oil prices to move higher from current levels as a result," Worah said in an e-mail. "While we aware of the risks, we still expect US GDP growth to come in around 2 per cent."

David Herro, manager of the US$24 billion Oakmark International Fund, said low energy prices should support consumer spending, the biggest part of the US economy.

"I don't think the drop in equity prices is at all warranted by economic fundamentals," Mr Herro wrote in an e-mail.

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