Barclays, the British banking giant, is planning to drop thousands of its investment banking clients as part of a radical overhaul of its business, according to a report by the Financial Times. The move is aimed at improving the profitability and efficiency of the bank, which has faced criticism from investors and regulators over its performance and strategy.
Barclays to focus on core and profitable clients
The FT reported that Barclays is exploring a plan to cut off or reduce services to about 7,000 of its 14,000 investment banking clients, which include hedge funds, asset managers, pension funds and sovereign wealth funds. The bank will focus on its core and profitable clients, which account for about 60% of its revenues and 80% of its profits.
The plan, which is expected to be revealed before the summer, is part of a broader strategic review led by Jes Staley, the chief executive of Barclays, who took over the role in December 2023. Staley, a former JPMorgan banker, has been tasked with reviving the fortunes of Barclays, which has lagged behind its US and European rivals in terms of profitability and shareholder returns.
Staley has already announced some changes to the bank’s structure and management, such as merging its retail and investment banking divisions, appointing new heads for its corporate and international businesses, and reducing its stake in its African operations. He has also pledged to cut costs and improve the bank’s capital and leverage ratios, which have been under pressure from regulators.
Barclays faces challenges from investors and regulators
Barclays’ plan to drop thousands of investment banking clients comes amid a challenging environment for the bank, which has faced several headwinds in recent years. The bank has been hit by a series of scandals and legal issues, such as the Libor rigging, the Qatar fundraising, the forex manipulation and the dark pool trading. The bank has paid billions of pounds in fines and settlements to regulators and authorities in the UK, the US and other countries.
The bank has also faced criticism from some of its investors, who have questioned its strategy and governance. The bank’s share price has fallen by more than 40% since 2020, and its return on equity, a key measure of profitability, has been below 10% for the past five years. Some investors have called for the bank to shrink or spin off its investment banking arm, which has been seen as a drag on its performance and a source of risk.
The bank has also faced pressure from regulators, who have imposed stricter capital and leverage requirements on banks after the global financial crisis. The Bank of England, the UK’s central bank and prudential regulator, has been particularly tough on Barclays, which has one of the largest balance sheets in the UK. The Bank of England has demanded that Barclays maintain a minimum leverage ratio of 4.95%, higher than the 3% required by international standards.
Barclays hopes to boost its investment banking business
Barclays’ plan to drop thousands of investment banking clients is seen as a bold move by Staley, who has defended the bank’s investment banking business and its role in the UK’s financial system. Staley has argued that Barclays has a competitive advantage in its transatlantic presence, its diversified portfolio of businesses, and its strong client relationships. He has also said that the bank’s investment banking business is essential for supporting its corporate and retail banking activities, and for providing services to its global clients.
Staley has also said that the bank’s investment banking business has a potential to grow and improve its profitability, especially in the US, where the bank has a strong presence and where the market conditions are more favorable. He has said that the bank will invest in its investment banking business, especially in areas such as equities, prime services, corporate finance and advisory.
By dropping thousands of its investment banking clients, Barclays hopes to boost its investment banking business by focusing on its core and profitable clients, reducing its costs and complexity, and improving its risk and capital management. The bank hopes that the move will enhance its performance and reputation, and ultimately increase its shareholder value.
