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July 08, 2015 at 05:38 AM
Barclays Plc Chairman John McFarlane may seek to broaden an overhaul of the investment bank after ousting Chief Executive Officer Antony Jenkins as Britain’s second-largest lender accelerates efforts to revive profit.
McFarlane, who is taking over from Jenkins until a successor is found, has pledged to reallocate capital and prioritize investment in the lender’s most profitable units. He’s seeking a new CEO who is familiar with investment banking, he said Wednesday, as he tackles restoring the division which has slumped to being the company’s least profitable.
“The investment bank seems to be destroying value,” said Arun Melmane, a London-based analyst at Canaccord Genuity, who has a buy rating on Barclays. “The pace of restructuring ought to improve.”
Barclays already plans to cut some 7,000 jobs at the investment bank, run by Tom King, and set up a unit for the sale of assets such as complex derivatives. Rising costs stemming from tougher regulatory demands and fines for market rigging have eroded earnings at the unit, which generates about a fifth of the group’s pretax profit, down from almost half in 2011.
“Jenkins was dealt a duff hand and he’s paid the price for not being brave enough,” said Ed Firth, head of European bank research at Macquarie Group Ltd. “When he took over he had a huge investment bank that pretty much did as it liked and it took him too long to sort through this.”
Revenue Lag
The division reported a 2.7 percent return on equity in 2014, trailing the group target of 12 percent. Barclays needs to bring costs down and may also need to slim down businesses that lack scale to compete with international peers, Melmane said.
Revenue at the investment bank in the first quarter rose just 2 percent from the year-earlier period to 2.15 billion pounds ($3.3 billion). The world’s top investment banks saw revenue rise almost 10 percent on average in the period, data compiled by Bloomberg show.
