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Barclays to cut 3,000 after Lehman deal

Layoffs will amount to over 10% of combined investment banking, trading operations.

by Barney Gimbel and Peter Gumbel
October 10, 2008: 6:37 AM ET
The Lehman Brothers building in Times Square in New York was recently rebranded.

LONDON (Fortune) -- Barclays PLC will cut about 3,000 jobs in the aftermath of its purchase of bankrupt Lehman Brothers' North American investment banking and capital markets businesses, Fortune has learned.

In September, the third-largest British bank acquired Lehman operations that include fixed income and equities sales, trading, and research and investment banking. About 10,000 employees worked in those groups at Lehman, which is now part of a unit known as Barclays Capital.

Barclays (BCS) president Bob Diamond has been spending much of his time in New York overseeing the integration of the Lehman shop into his own investment banking and trading groups. He hopes to have the operation wrapped up by year's end, including the elimination of the staff positions. Diamond confirmed the headcount reduction to Fortune.

How many of the lost jobs would come from the old Lehman ranks and how many from Barclays could not immediately be determined. Most of the cuts are expected to come in areas where Lehman and Barclays Capital have a lot of overlap, such as fixed income, and in support functions like information technology. Total employment at Barclays Capital numbers 26,000.

This year has been a brutal one for financial services workers, and it's not expected to get any easier. Financial firms in the U.S. shed over 65,000 jobs in the first eight months of 2008.

Lehman declared bankruptcy last month after efforts to sell off some or all of the firm to competitors including Barclays failed when U.S. officials refused to provide any financial assistance to would-be acquirers.

When Lehman filed, the door opened for Barclays to swoop in and pick up businesses it wanted without having to take on the burden of Lehman's troubled investment portfolio, which was filled with mortgage-backed securities and commercial real estate loans on which the company had already taken billions in writedowns, with no end in sight.

Barclays paid $250 million for the banking and trading businesses. It also paid $1.5 billion for Lehman's New York headquarters and two data centers in New Jersey.

Analysts are divided over whether the Lehman acquisition is a stroke of genius or madness. Investment banking, after all, isn't a brilliant business to be in these days. Barclays stock is down 50% since the deal, and like all British banks it has had to fight off rumors about its solvency.

In the first six months of the year, Barclays took write-downs of $4.9 billion on assets exposed to credit markets. It has an additional $6.2 billion of losses to record, making Barclays Britain's "least well-capitalized bank," investment bank Dresdner Kleinwort said in a September 22 note to clients.  To top of page

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