After months of rumours, it’s now official, Barclays are moving their Spanish subsidiary to Barclays Non-Core, a basket of assets worth €140 million not focusing on core activity, that is: personal and corporate banking, credit cards, investment banking or Africa banking.
Barclays are reducing their retail banking operations by cutting 14,000 jobs this year worldwide (50% front office, 40% operations and IT, and 10% central functions) and 5,000 more investment jobs by 2016 as well as moving their banking operations in Spain, Portugal, Italy and France to Barclays Non-Core, a new, ‘non strategic’ unit – or bad bank, where all the assets will be sold off or wound down. The 572 European branches created a £964m loss last year, and Barclays are responding to increased pressures to reduce costs.
Forty years in Spain, with 271 branches and 2,819 employees, Barclays are still keen to keep a presence here, in particular for high wealth clients, corporate banking, investment banking and credit cards, as part of their Global activity, with plans to automate or sell the rest of their mortgages and loans (though nothing has been confirmed). Barclays have had to react to the €681million loss from 2011 up to September 2013 that the Spanish subsidiary has accrued, and the global cost saving strategy is pushing towards a more automated service by encouraging mobile and online banking. Plans to downscale branches worldwide (400 branches in the UK are closing and setting up in ASDA stores) and reducing other costs- withdrawing Boris Bike sponsorship in the UK for example- will make them a leaner, more cost effective company in the long term.
Additionally, reducing their overall Investment banking activity from 50% to a more balanced 30%, not only reduces the share of more risk weighted assets, but also saves money, as the changes to the banking sector- and mostly to investment- has made some trading activity too costly to pursue. Barclays are withdrawing presence in Asia and Western Europe, lowering risk, concentrating on their UK and USA markets for investment (and the top 1,000 clients), together with focusing on the other 3 main core businesses: personal and corporate banking operations, Barclaycard credit card and African banking.
We will wait to hear what will become of residents’ and non residents’ existing mortgages, and bank accounts: Will they be bought by another big bank, or sold to an investment company? In the meantime, it’s unlikely there will be major disruptions while they continue to be managed by Barclays.