Analyst predicts Barclays will cut investment arm

 
Tim Wallace
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Barclays’ investment bank’s return on tangible equity was just 2.8 per cent last year (Source: Getty)

Barclays will struggle to reform its investment banking operations, and could have to announce a series of major cuts to the unit, Macquarie analyst Ed Firth predicted yesterday.

Chief executive Antony Jenkins and finance boss Tushar Morzaria last week committed to the arm’s future in the bank, but did note that more changes would be made if improve­ments do not emerge soon.
But Firth believes it is a relatively poorly performing part of the group, and swathes of it could face the chop if it does not turn around fast.
He compares the unit to RBS’ investment bank, which is being cut back radically. Excluding legal and restructuring costs, Barclays’ investment bank’s return on tangible equity was just 2.8 per cent last year, compared with RBS’ 1.9 per cent.
“Barclays’ management seem relaxed about it – I wouldn’t be,” said Firth. “You don’t hear other investment banks talking about this lower-cost model, and I am sceptical they can deliver it. I’d wager that by the end of 2016, we will get an announcement that is almost word for word like RBS’.”
In particular, he believes incoming chairman John McFarlane will run out of patience rapidly.

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