WHEN, FIRST ON CNBC: Today, Thursday 8th May
WHERE: CNBC's Squawk Box in EMEA
Following is the unofficial transcript of a CNBC interview with Antony Jenkins, CEO, Barclays. Following is a link to the interview on CNBC.com: http://www.cnbc.com/id/101653128.
All references must be sourced to CNBC.
CNBC's Geoff Cutmore: Just lay out for us the guiding principles in the announcement this morning, what is it you think you've announced this morning that will reinvigorate the business at Barclays?
Antony Jenkins: This is about Barclays future as a focused and balanced international bank. A bank that can be the go-to bank for our customers and clients but also deliver substantial returns for our shareholders. Basically we're dividing the bank into two, a core group of four strong businesses that are well positioned in their markets with good growth prospects and good returns. We're combining our personal and corporate banking interests in the UK into a new business. We have our Barclaycard payments business, our Africa interests and an investment bank which will be much more focussed on client led origination, and a smaller part of the group going forward. We've set a target that by 2016, the investment bank will account for no more than 30% of the core of the group, and then everything else which is non-strategic will go into a non-core unit and that includes parts of the investment bank, our retail interests in Western Europe and certain other corporate interests in Europe and the Middle East.
GC: And just to focus on that non-core operation for a moment here, what percentage of those assets are non-performing at this stage? Because I understand you don't want this to be called a 'bad bank' as it's been christened in the media, you would rather it something else, but to what extent are there non-performing assets in the portfolio?
AJ: The assets within the portfolio are generally performing well, this is not about a set of bad assets that we're trying to run-off. This is about non-strategic assets which we want to exit or run-off over time. The vast majority of it is from the investment bank, it's about 115 billion in total of risk weighted assets, 85% of that is from the investment bank, and we are targeting to run that down to about 50 billion of risk weighted assets by the end of 2016. So a very significant reduction in the non-core assets over that time period and we're confident we can achieve that.
GC: In terms of assets from the investment bank, to what extent are many of them under water? Are you able to give us a figure that would represent how far off the market price paid you are?
AJ: As you will understand these are assets that we mark to market regularly so if they were under water we would have taken those marks and so that's why we believe that those assets are performing well and as we will say later on today we expect that there will be very little or no diminution in tangible net asset value as we run those assets off. So they are well performing assets, they are appropriately marked, this is about things that are non-strategic for us.
GC: Would you anticipate at some point either a sale or an IPO of the retail branch unit in Europe?
AJ: That's a possibility, we've certainly said that everything in the non-core is things that we want to exit over time, we're going to do that in an economically rational way and in a way that benefits for our shareholders. So clearly a sale or an IPO would be a potential option for some of those assets that we've got in there.
GC: Where does this leave the retail business in the UK? This has clearly been a strong part of Barclays proposition as a banking group. To what extent do we see the retail operation in the UK weakened by the announcement today?
AJ: Actually I'm very excited about the prospects for each of the four businesses within the core, they're in there because they can deliver for our customers and clients, and they can deliver for our shareholders. Our retail bank in the UK had a fantastic first quarter, we're leading the way in the deployment of technology, and combining our corporate bank and retail banking interests together with our wealth management business will allow us to accelerate, building our market shares, growing revenues, gaining customers, making more profit and better returns for shareholders. So this will allow us to accelerate our strategy for each of the four businesses but particularly in the case of the UK retail business.
GC: And you've made significant additional job cut announcements today with regard to the investment bank, you've been running the business now since 2012, this announcement comes, what a year and a half later, what has changed either in the market or in the way you're managing Barclays that you feel it is now necessary to bring these additional job cuts to the investment banking operation?
AJ: I think there have been two very significant changes, even in the last twelve months. The first is that regulation has become much clearer and the impact of regulation particularly on certain aspects of the investment banking business which are much more capital intensive. These tend to be the longer dated ends of the FICC business, the less structured ends of the FICC business, that's the sort of activity we won't be doing going forward. But secondarily we also believe that the economic environment has deteriorated for the FICC business and that some of the pressures that we saw in the business towards the end of last year are clearly structural as well as cyclical. And so now is the right time to reposition the bank so that we can win in this new world as a focused international bank.
GC: Are you able to give us a break down of which desks those job cuts come from? Will it be the bond trading department that makes the major loss here? Can you give some more specifics on how the job cuts will fall?
AJ: We'll be giving more details on that in the course of the day, but essentially you'll have noted that we have already announced our exit from large parts of our commodities business, certain parts of our emerging markets business, the capital intensive parts of the FICC business that I described earlier, our principle trading activities. These are the sort of things that we'll be exiting, and of course the 7,000 job reductions that we've announced in the investment bank will be spread across the next three years – '14, '15 and '16 – and will be spread between the front office, middle and back.
GC: From what you've described it seems you don't anticipate any pick up really in the outlook for the FICC business for some time to come?
AJ: I think that's correct. I think the combination of much greater capital allocation towards FICC activities and the state of the economy with the end of quantitative easing, tapering and so on means that the outlook for FICC is quite challenged going forward, and we believe that is going to persist for a number of years which is why now is the right time to reposition the investment bank, but also to reposition the investment bank inside the Barclays Group. It's a very important item that we've introduced, that the investment bank will be no more than 30% of the group's risk weighted assets by 2016.
GC: Barclays shareholders will today be asking themselves 'Is Mr. Jenkins a man I can trust with the stewardship of this organisation.' Do you think your comments about 'death spiral' as it related to compensation and bonuses was ill-advised?
AJ: Not at all, I knew that we were going to execute a very significant transition within the investment bank and I knew that we had to protect the people that we want to retain in the parts of the investment bank that we're going to keep. Those parts of the investment bank are excellently performing. We are really powerful in both the US and UK, we have great franchises there and we have great people there, and the actions we took to protect those people and keep them engaged with Barclays were the right actions.
GC: Do you think you were right on bonuses or do you think the politicians are right on bonuses?
AJ: Well essentially I'll give the same answer to the question you asked a minute ago, we needed to protect the franchise as we go through this transition. We have lots of parts of the investment bank which do great things for clients, high performing, generate good returns for shareholders and we protected those parts.
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For more information contact:
Hugo Foulds, Director of Communications, EMEA
t: +44 (0)20 7653 9398