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Huge job cuts at Barclays send FTSE higher
by Daniel Grote on May 08, 2014 at 10:57
Barclays (BARC.L) has helped to drive the FTSE 100 higher as the bank’s radical plans to cut 19,000 jobs over the next two years won favour with investors.
The FTSE 100 rose 33 points, or 0.5%, to 6,830, helped by an overnight rally on Wall Street after Federal Reserve head Janet Yellen said the central bank would continue to support the US economy.
Barclays was the highest riser, soaring 13.7p, or 5.6%, to 257p. Barclays announced it will cut 19,000 jobs by 2016, with 14,000 going this year, and create a ‘bad bank’ that will sell or run down £115 billion of non-core operations.
Around £90 billion of investment bank assets will be placed in the bad bank, and 7,000 jobs will be cut from this division.
‘This is a bold simplification of Barclays,’ said chief executive Antony Jenkins. ‘We will be a focused international bank, operating only in areas where we have capability, scale and competitive advantage.’
Analysts welcomed the plans. ‘Our initial reaction is positive,’ said Mike Trippitt, analyst at Numis. ‘With 20/20 hindsight perhaps this was the restructuring that should have been announced in February 2013.
BT Group (BT.L) also rose strongly, adding 10.6p, or 2.8%, to reach 387p as it announced better-than-expected quarterly results. Group revenues dropped 1.4% year-on-year to £4,748 million, ahead of investor expectations.
Standard Chartered (STAN.L) meanwhile jumped 47p, or 3.7%, to £13.27 as the bank announced a small growth in revenues in the first three months of the year, having warned of lower revenues in the first half of the year.
Sage (SGE.L) was the biggest faller, dropping 23.2p, or 5.5% to 398.8p as chief executive Guy Berruyer announced his retirement alongside the software group’s results for the six months to the end of March. Investec analyst Julian Yates said Berruyer’s retirement would raise questions about the group meeting its 2015 targets, ‘as these were financial goals closely associated with him’.
‘Sage is making good progress against its goals, but with the comparatives becoming more challenging, we still remain cautious about the group hitting its 6% organic growth target, while necessary investment in the business is likely to cramp margin expansion in our view.’
Investors will also be looking ahead to the outcome of the Bank of England policy meeting, with rates expected to be kept on hold at record lows again.
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