Barclays concedes to Wall St rivals
Barclays lacks the scale to compete with big US investment banks, its new executive chairman admitted as he outlined plans to focus on the US and UK, while pulling back in Asia, the Middle East and Africa.
John McFarlane became chairman of Barclays in May and took on extra executive powers two weeks ago after ousting Antony Jenkins as its chief executive, in part because of a dispute over strategy at its investment bank.
"When you look at the dominant investment banks, they are North American," he said at his first press conference. "They have the scale that we no longer have to be global, so we are going to have to focus on our core US and UK markets and our feeder network elsewhere."
Mr McFarlane said Barclays was only halfway through the transformation of its investment bank and set a demanding new cost-cutting target. AP
While hailing a sharp improvement in interim results, Mr McFarlane said Barclays was only halfway through the transformation of its investment bank and set a demanding new cost-cutting target.
"We don't want to be a 100-country investment bank," he said, adding that the lender's Asian operation "is not performing and we don't like things that actually don't make money", while admitting that it does contribute to its US and UK clients.
Interim net profits at Barclays rose 43 per cent year-on-year to £1.6 billion, helped by a rise of more than one-third in earnings at its investment bank. Revenues were up 5 per cent and pre-tax profit rose by a quarter.
However, Mr McFarlane said return on equity at the bank remained well below its target, at 5.9 per cent.
Mr McFarlane promised to "accelerate earnings growth, return on equity and capital generation" by increasing revenues "at least in line with the market" and reducing the bank's cost/income ratio from 70 per cent to the mid-50s.
The wind-down of the non-core unit set up last year would also be accelerated, he said, taking it from £57 billion of risk-weighted assets at the end of June to below £20 billion by 2017, when it will be reintegrated with the bank.
Mr McFarlane also switched Barclays' dividend policy from distributing 40 to 50 per cent of profits to a "sustainable and progressive" policy and said the bank planned to keep this year's payout flat at 6.5p.
Analysts at Berenberg said this was below their forecast of 7.7p and Citigroup analysts called it "slightly disappointing but understandable".
Barclays shares were up 1.79 per cent at a new 52-week high of 284.6p by the close of trading yesterday.
Financial Times
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