Barclays announced it is cutting around 5,000 jobs, or 5 percent of its workforce, this year as part of a cost-reduction drive powered by artificial intelligence, even as the British lender reported a 12 percent rise in third-quarter profit, Reuters reported.
Third-Quarter Profits Rise While Trading Desk Fails Expectations
The banking giant posted a third-quarter pretax profit of £2.3 billion, equivalent to about $3.08 billion, rising from £2.1 billion a year ago. Despite the year-on-year increase, the earnings fell short of analysts’ forecasts. The miss was driven primarily by an underperforming fixed income trading division during a volatile quarter.
“I am disappointed, and you can be sure this will get my attention,” Chief Executive Officer C.S. Venkatakrishnan told reporters, placing direct blame on weak trading in rates and credit products.
Total income for the investment bank reached £3.1 billion in the third quarter, missing consensus expectations of £3.3 billion. While Barclays enjoyed a strong 47 percent surge in equities revenue—outperforming the average 37 percent gain recorded across the top five U.S. players—its fixed income trading income slid 19 percent down to £1 billion. That decline outpaced the 5 percent drop seen among American peers.
AI and Automation Target Support Function Roles
To curb overhead expenses, Barclays took an additional £201 million in structural cost actions during the third quarter. Chief Financial Officer Anna Cross explained that approximately 60 percent of the total 5,000 job cuts will impact employees in support functions, such as software developers. This is one of the clearest indications to date of how large financial institutions are using artificial intelligence and automation to trim headcount in operational roles.
Cross confirmed that 1,000 of those positions have already been eliminated, with the remaining roles slated to disappear before the end of the year.
“The cuts illustrate just how significantly AI and automation could reshape the banking industry over the next few years,” said Will Howlett, a financials analyst at fund management business Quilter Cheviot.
The lender’s shares slipped 0.1 percent following the earnings release, outperforming the broader European banking index. European lenders have faced a broader market correction this year, with Barclays stock down 12 percent over the period following a multi-year rally fueled by higher interest rates.
Budget Looming Over British Banking Sector
Barclays stands as the first major European lender to report its quarterly earnings. However, results across the British banking sector remain overshadowed by upcoming fiscal announcements. Finance Minister John Healey is scheduled to deliver his first budget on October 28, where markets anticipate potential new levies on bank profits.
Healey has repeatedly declined to rule out hiking taxes on bumper banking profits, despite intensive lobbying from industry executives arguing that additional burdens will unnecessarily curb commercial lending.
