Barclays boss to pare down bank

Reuters

A city worker passes a Barclays bank branch in Canary Wharf, east London.

Barclays' new boss promised bold action to tackle big bonuses at its investment bank and to cut businesses that suck up too much capital, as he reforms a culture regulators have criticised as too aggressive.

Chief Executive Antony Jenkins, appointed 11 days ago to restore the reputation of Britain's fourth-largest bank after a series of scandals, on Monday said investment banking has a central place within the group.

But capital markets activities that consume a lot of capital or are too risky look likely to be in his line of fire.

“I absolutely believe that a premier investment banking franchise will be a part of it (the bank),” Jenkins told analysts on a conference call, providing the strongest clues yet on how he will shape Barclays.

He pledged to change areas of the bank that are inefficient or underperform and to “move quickly and be bold.”

“How can we best use our capital, how can we allocate it to areas that are going to deliver the sustainable return with the reputational credibility that we're seeking to deliver?”

Jenkins refused to offer details on his plans, saying that would come early next year after he conducts a review of each area based on the capital consumed and return generated, costs, and the pay structure and level.

He has scrapped a previous target of a return on equity (RoE) of 13 percent, opting to deliver a return above the bank's cost of equity of around 11.5 percent, and show how that can be sustained.

With rivals also shrinking their investment banks, analysts said a key issue is how far Jenkins goes at Barclays where investment banking generates more than half the bank's total profit.

“I would expect to see a gradual de-emphasis of the investment bank and a reallocation of capital elsewhere,” said Shore Capital analyst Gary Greenwood.

Also high on Jenkins's to-do list is how far to overhaul the senior management team at the bank, which was rocked by a record fine of more than $450 million in June for rigging interest rates and is being investigated over a fundraising.

The rate-rigging probe unearthed long-standing concerns by Britain's financial regulator about the culture under former CEO Bob Diamond and Chairman Marcus Agius, who both resigned as a result of the scandal.

Chris Lucas, finance director since 2007, is most under pressure after the regulator's criticism. He was also named as one of four people being investigated by the regulator over a fundraising from Qatari investors four years ago.

Jenkins could also look to remove executives who were close to Diamond, such as investment bank boss Rich Ricci and wealth management head Tom Kalaris.

“Given the change of culture that Jenkins is required to drive, a senior management shake-up is highly likely. My feeling on timing is that people will want to see some signs of things happening before the year is out,” said one of the 25 largest shareholders in the bank.

The bank has also been caught up in an insurance mis-selling scandal and a tax avoidance row.

Barclays declined to comment. Shortly after his appointment, Jenkins voiced support for Lucas and the management team. - Reuters