Barclays Needs to Axe 30% of Investment Bank Workforce to Make Money, Claims Bernstein

A prominent research group has warned Barclays that it needs to axe 30% of its investment banking workforce in order for it to repair its damaged balance sheet and return to profitability.

According to a Bernstein analyst, Barclays needs to cull its headcount by 7,500 in a bid to overcome tougher banking regulations that are coming into force over the next couple of years, which are set to hit financials' profits.

"That's where a fundamental shake-up is required. We expect 6,500 to 7,500 full-time equivalent jobs to go, with more than 5,000 in the European fixed income, currencies and commodities (FICC) business," said Bernstein analyst Chirantan Barua in a research note.

According to Barclays' 2013 financial results, it will axe 12,000 jobs to cut costs and a 32% fall in profits to £5.2bn (€, $) last year.

The bank said it is axing 7,000 jobs in the UK and 5,000 from across the globe as it aims to pare back its 140,000 total headcount.

Within the same statement, Barclays said it increased staff bonuses and incentive rewards to £2.38bn in 2013, from £2.17bn in 2012, despite the bank racking up hefty mis-selling compensation payouts and posting a drop in earnings.

Barclays' FICC unit accounts for 60% of the bank's capital.

Investment banker payouts also rose by 13% year-on-year to £1.57bn despite income within this unit being down by 9% to £10.7bn.

Bernstein's Barua said that tougher banking regulations hacked off between 20% to 30% of FICC income and the massive round of job cuts will save the group £1bn in annual costs and reduce compensation to about 33% of income by 2016.