Barclays Plc, under pressure to boost returns, will eliminate7,000 jobs at its investment bank, about a quarter of the total,and signaled its effort to build a global bank is over.

Chief Executive Officer Antony Jenkins's plan will bring thenumber of jobs to be cut across the firm by 2016 to 19,000,including the 12,000 the lender said in February it would eliminatethis year. Barclays will create a bad bank to dispose of 115billion pounds ($195 billion) of assets, including its Europeanconsumer arm. The investment bank will primarily target the U.K.and U.S., and serve fewer clients, while its Asian unit will be“more focused,” Jenkins told reporters today.

“The investment bank is too exposed to volatility infixed-income, currencies and commodities, and the group is tooexposed to volatility in the investment bank,” Jenkins, 52, toldanalysts on a conference call.

A consumer banker by training, Jenkins has been under investorpressure to cut costs at the investment bank created by hispredecessor, Robert Diamond. The unit this week posted a 49 percentdrop in first-quarter profit, as revenue from FICC, traditionallyits biggest source of income, dwindled.

Jenkins said today that market faces a structural rather than acyclical decline and that investment banking revenue will be “weakfor some time.” That revenue weakness has prompted other Europeanfirms such as Switzerland's UBS AG to scale bank sooner, and berewarded with gains in their stock prices.

Barclays — before today, down 10.5 percent this year and theworst performing bank stock in Britain — rose as much as 6.6percent and was up 14.55 pence at 257.85 pence as of 1:48 p.m. inLondon trading. By contrast, UBS, which is exiting mostdebt-trading activities, has gained almost 8 percent this year inZurich trading.

“The revised strategy is sensible and should be well received,”Andrew Coombs, an analyst at Citigroup Inc. in London, wrote in anote to clients. “The shift in business mix from investment bankingtoward retail and commercial could potentially lead to a re-ratingin Barclays' shares.”

The plan will cut the investment bank's share of the firm'sassets to 30 percent by 2016 from about 50 percent, Barclays said.The overhaul will cost an additional 800 million pounds, adding tothe 2.7 billion pounds the bank announced in February.

Bad Bank

Barclays's bad bank, to be run by Eric Bommensath, will hold 90billion pounds of risk-weighted assets from the investment bank,including complex derivatives from its FICC operation and someemerging-market specific products. It will also include 16 billionpounds of assets from the European retail and business bank as wellas 9 billion pounds of assets from the corporate bank, Barclaycardand wealth-management units.

Jenkins will seek to cut the bad bank's assets to 50 billionpounds by the end of 2016. That will help to reduce the unit's dragon return on equity, a measure of profitability, to 3 percent by2016 from 6 percent today. The rest of bank will target a 12percent return on equity in 2016, Barclays said.

Barclays said it will make preserving net asset value “apriority” as it scales back the bad bank. Even so, the unit islikely to generate more losses than expected, according toChristopher Wheeler, a banking analyst at Mediobanca SpA inLondon.

“While its commendable that management has gone the distance,unfortunately without any macro tailwinds, it will be painful forthe next 12 to 18 months,” said Chirantan Barua, an analyst atSanford C. Bernstein Ltd. who rates Barclays market-perform. “Youcan't have 7,000 people walk out the door without any implicationson income.”

Pretax profit at the investment bank fell to 668 million poundsin the first quarter from 1.32 billion pounds in the year-earlierperiod, hurt by a decline in revenue from trading bonds, currenciesand commodities.

The overhaul is Jenkins's second since he took over as CEO inAugust 2012 after the bank's record fine for manipulating theLondon interbank offered rate. Diamond had rebuilt the investmentbank after Barclays sold its money-losing European equities unit,focusing on bonds, loans and foreign exchange.

In 2008, Barclays acquired Lehman Brothers Holdings Inc.'s NorthAmerican operations out of bankruptcy and then embarked on a hiringspree to add stock underwriting and merger advisory businesses andbankers in Europe and Asia to match its standing in the U.S.

'Generational Shift'

Barclays has struggled since the financial crisis to reduce itsdependence on the unit, which once accounted for more than half ofprofit and assets. Then-CEO John Varley said in Feb. 2009 heexpected the investment bank to account for 30 percent of assets by2016. The figure is still more than 50 percent today.

The operation has suffered departures of key dealmakers ascompensation at the division came under criticism from investorsand politicians. In the past week, Jenkins has lost Hugh “Skip”McGee, the firm's most senior banker in the U.S., Robert Morrice,chairman of the Asia-Pacific region, as well as investment-bankingchairman Ros Stephenson.

Jenkins said in an interview today the departures wereunconnected to the job cuts and marked a “generational shift.”

“We will be competitive as we are today,” Jenkins said in theinterview with Bloomberg Television's Francine Lacqua. “We arefocusing on where we can compete, and compete successfully.”

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