(Bloomberg) -- Barclays Plc is exploring cutting ties with some of its less profitable investment banking clients as the bank’s management team considers options to overhaul the bank, according to the FT.
Executives are mulling trimming clients that don’t transact with Barclays enough to earn a good return, the Financial Times said, citing several people familiar with the discussions. That could mean ending relationships with more than 2,500 customers out of a total of over 10,000, the paper said, while noting that a person close to Barclays said the figure was lower.
Dropping less profitable clients could cut risk-weighted assets at the division by as much as £20 billion ($25.2 billion), according to the FT, which said the bank’s board has told the division to target a return on tangible equity to 14% or 15%, up from about 11.5% today.
A spokesperson for Barclays declined to comment.
The lender this year hired Boston Consulting Group to help on a strategy review of the lender’s operations. Barclays comprises one of the UK’s largest retail banks as well as an international credit card business and a global investment bank. Its price-to-book value remains below 50%, lagging retail-focused rivals.
The British firm reported disappointing third-quarter earnings last month, which prompted a fresh slide in the bank’s share price. In the UK, the tailwind from higher interest rates is slowing while Barclays’ traders couldn’t keep pace with US peers.
The bank said last month that it’s “evaluating actions to reduce structural costs to help drive future returns, which may result in material additional charges” in the fourth quarter. It said it would also provide an investor update alongside full-year results in February, where it is expected to unveil a fresh strategy.
The latest details follow a report last week that the bank is looking to reduce costs across the group by as much as £1 billion over several years, which could involve slashing as many as 2,000 jobs, mainly in the back office.
What Bloomberg Intelligence Says
Revenue prospects have been hit by a margin squeeze in the UK retail bank (with company guidance downgraded) and 3Q’s 26% drop in fixed-income revenue in the investment bank. Those factors are pressuring management to offset the earnings hit by downsizing the cost base.
Philip Richards, BI analyst
--With assistance from William Shaw.
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