LONDON, Sept 12 (IFR) - Barclays plans to step up financing in its corporate and investment bank, particularly in fixed income and equity, as part of its plan to improve returns in the business.
Chief executive Jes Staley said he does not plan to increase capital allocated to CIB, but to make use of about £20bn from its corporate loan book that is delivering inadequate returns and by leveraging up its balance sheet after years of shrinking it.
“With our leverage ratio at 4.8% as at June 30, we are no longer leverage constrained. And that means there are compelling opportunities, with many clients ... coming to us, looking for financing,” Staley told investors at a conference in New York late on Monday.
That includes in fixed income financing, where Staley said returns are attractive, Barclays had a high market share and it can drive revenues higher.
“It is in parts of equity financing where we see the biggest opportunity to gain share, particularly in synthetic financing,” he added. “Performance here would be transformed simply by regaining the market position we held just a few years back.”
Staley said Barclays had restructured and repositioned the investment bank in the past two years, but its return on allocated equity of 9.7% in the first half of this year was still below its cost of capital and the 10%-plus target it has for the bank.
He said CIB’s returns will also be helped by a fall in its wholesale funding costs in the next few years, “driven very much by revised issuance assumptions and improvements in funding spreads”.
Returns across Barclays will also be helped by £1bn of cost savings already in progress and the setting up of a new service company that came into operation last week, Staley said.
The business, known internally as ServCo, will be fully operational next April and deliver operations, technology and functional services.
Staley said ServCo is probably the “most significant initiative happening at Barclays right now” as it will deliver services across the bank, rather than to each business unit.
“It will radically reduce duplication, and improve efficiency and operational effectiveness across the group, driving shareholder value, and a more consistent and improved experience for Barclays’ customers,” he said.
On technology, for example, it will see the ratio of employees to third-party technology workers shift from 50:50 to around 75:25 over the next few years. Staley said by next Easter the bank will replace 2,300 third-party workers with 1,600 new internal technology staff at a much lower cost, and keep the intellectual property within Barclays.
It is also integrating 10 separate fraud handling departments into just one. (Reporting by Steve Slater)