Home Investment Barclays’ Investment Bank Struggles as Activist Investor Pressures Unit – The Wall Street Journal

Barclays’ Investment Bank Struggles as Activist Investor Pressures Unit – The Wall Street Journal

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Customers use an ATM at a branch of Barclays in London.


Photo:

Jason Alden/Bloomberg News

LONDON—

Barclays


BCS -0.93%

PLC Chief Executive Jes Staley dismissed the need for any strategic changes after first-quarter net profit in its corporate and investment bank fell 28%.

Activist Sherborne Investors is calling for Barclays to move capital away from the investment bank and shrink its markets business. Next week, shareholders will vote on a Sherborne proposal to appoint its chief, Edward Bramson, to the Barclays board to trigger a change in strategy.

“We like the progress we’re making in the (corporate and investment bank). We like the profitability of our markets business in the first quarter. And we’re going to continue with the strategy we set out three years ago,” Mr. Staley said Thursday.

Barclays said investment banking net profit fell from the first-quarter 2018 to £582 million ($752 million) from £805 million, because of reduced client activity, lower volatility and fewer corporate deals. The bank’s overall net profit in the quarter was £1.04 billion, up from a £764 million net loss last year from regulatory settlements.

The results ramp up pressure on Mr. Staley to prove the bank’s strategic mix of consumer, business and investment banking can work. Barclays, with large trading businesses in New York and London, is one of the few remaining European banks attempting to compete with Wall Street giants such as

JP Morgan Chase

& Co. and

Bank of America
Corp.

Mr. Staley said Barclays has made huge strides since the strategy was announced in March 2016, including wrapping up regulatory probes and investing in technology, and that 2019 just “may be one of those years where the first quarter is not strong.”

In letters to Barclays’ shareholders, Mr. Bramson has argued that Barclays doesn’t have the large corporate client or wealth management businesses that would drive trading business and make revenue in its investment bank more stable. He attributes Barclays’ lagging share price relative to peers to “the board’s prolonged pursuit of a strategy that is not grounded in the fundamental realities of the global CIB marketplace.”

Mr. Staley hit back Thursday, saying: “Those that argue that we’re structurally disadvantaged against the U.S. banks—if disadvantage leads to six quarters of income growth, maybe we should keep it.”

He said Barclays is sticking by a 9% target for return on tangible equity this year and 10% by 2020. Some analysts downgraded their expectations in recent weeks that the bank will meet those targets. Mr. Staley said the bank could cut costs this year if revenue conditions continue to be challenging

In the first quarter, the ROTE was 9.6%. That figure, and the full-year ROTE targets, strip out litigation and conduct costs.

Barclays, along with other European banks, has been hindered in its returns from a rising cost of capital, Mr. Staley said.

Corrections & Amplifications
Net profit in its corporate and investment bank fell 28% from the first-quarter 2018 to £582 million ($752 million) from £805 million. An earlier version of this article used an incorrect number for the 2018 comparison.

Write to Margot Patrick at margot.patrick@wsj.com

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