Barclays Maps Uncertain Route to A Simpler, Stronger Future

• Barclays, unveiling its biggest revamp since 2016, sought to appease investors seeking a clearer route to less volatile returns. However, investors said the British lender's plan to dedicate fewer financial resources to its investment bank is at odds with ambitions to expand in some of the unit's higher-risk businesses.
• Barclays has historically devoted much of its capital to investment banking, roiling more conservative shareholders who say other businesses posting more reliable profits have been under-invested as a result.
• The bank will continue to allocate the lion's share of its firepower to investment banking, and while a bigger push into domestic lending is broadly welcomed, some analysts and investors are unconvinced the bank can grow market share enough to meet its lofty revenue goals, against strong competition and a skittish UK economy.
• Barclays' long-awaited strategic update presented on Tuesday will have the bank return at least 10Bn pounds ($12.66Bn) to investors and reorganize into five units from the current three business lines, a move it said would create a simpler and better-balanced bank. This so-called "re-segmentation" aims to give investors greater transparency of performance in each division, unlike the previous structure, which reported corporate lending and investment banking revenues together, the bank said.
• In a key part of the overhaul, Barclays will reduce the share of risk-weighted assets (RWA) devoted to its investment bank to around 50% by 2026 from about 63%. In turn, the bank plans to deploy around 30Bn pounds more to its UK consumer, corporate lending, and private banking arms that generate higher returns.
• By reallocating its capital, Barclays says revenue will grow to around 30Bn pounds by 2026 from 25.4Bn pounds in 2023.
• The average returns on tangible equity (RoTE) in the businesses the bank has pledged to invest in ranged from 18% to 31% in the two years to end-2023, compared with a more modest 10% at the investment bank, company figures show.

(Source: Reuters)