Do investment bank job cuts make Barclays a buy opportunity?

Gordon expresses ‘incredulity’ that at the start of the year the sell-side consensus predicted Barcap costs would rise from £7.2 billion in 2012 to £7.5 billion in 2014, versus his expectation of costs falling to £6.8 billion over the next two years.

'Given an expectation of a reduction in both overall headcount and cost per head, we regard this as unrealistic and expect Barclays to deliver a much more shareholder-friendly, (and politically expedient), outturn,' he said.

However, Gordon was more cautious on those who believe its investment bank arm will continue to rake in revenues as others pull out of the sector.  

‘Despite an assumption that Barcap will continue to enjoy ongoing market share gains as others retrench and/or exit, we do expect a modest adverse revenue impact in 2013e (as much driven by industry evolution as headcount rationalisation),’ Gordon said.  

‘Indeed, our 2014e Barcap revenue forecasts are down 1% versus 2012e. Consensus is more optimistic, and such optimism supports a recent crop of quite frothy target price inflation.’