Barclays is contemplating a strategic overhaul to enhance profits and reduce costs by approximately £1 billion, a plan that involves potentially parting ways with thousands of clients at its investment bank.
Executives have explored various options, including raising capital for acquiring a wealth or asset management business and reducing trading assets at the investment bank by up to 25%. However, resistance from co-heads of trading Adeel Khan and Stephen Dainton has steered Chief Executive CS Venkatakrishnan toward a more moderate approach.
The focus of the restructuring is likely to involve cutting ties with the least profitable investment banking clients, potentially affecting over 2,500 out of more than 10,000 customers. The investment bank, responsible for about two-thirds (£219 billion) of the total risk-weighted assets, is crucial to the review, aiming to optimise shareholder returns by reducing assets or reallocating them to more lucrative areas.
If executed aggressively, trimming less profitable investment banking clients could release up to £20 billion of risk-weighted assets, at a cost of less than 10% of division revenues. The board has directed the division, including Barclays' corporate business, to develop a plan targeting a consistent return on tangible equity of 14 to 15%, up from the current 11.5%. This entails a significant reduction in operating costs, estimated to decrease from about 65% to a mid-50s percentage ratio.
Barclays is also planning to cut up to 2,000 jobs across the group as part of the cost-saving initiative, with a focus on BX, the central hub providing back-office and technology services