Barclays is preparing to tell 7,000 low-return clients to either boost their trading or move to another bank in a continued effort to reshape its offering to keep pace with tighter capital rules.
The bank is aiming to get at least a 10 per cent return on capital from its markets clients and has recently launched a computer system called Flight Deck to help rank customers based on their returns levels and identify those who are currently not making the grade.
"We have the returns figures, so we can go and have those tough conversations with clients that don't meet our hurdle rates," Kashif Zafar, co-head of global distribution and co-head of macro products, said in an interview with Bloomberg. "We're not in the old-school business of doing big revenue with poor returns. That's a failing strategy."
Brett Tejpaul, also co-head of global distribution for credit and equities, added: "The onset of capital rules changed the business – more now isn’t necessarily better and we need to be a lot more selective. In the past we all had a rather one dimensional view through the revenue metric."
The decision has hardly been made overnight. The banking giant has been working towards a more focussed offering which prioritises returns over revenues for around the last two and a half years, and the lender has already dropped 17,000 clients – some of which Tejpaul described as "essentially inactive" despite the bank shelling out to maintain the relationships – from its books.
City A.M. also understands the further 7,000 clients identified for the cull, who provide less than one per cent of the revenue to Barclays' markets business, are unlikely to be pushed out the door immediately, as the bank will look for ways for them to do more business together.
Once Barclays' offboarding process is complete, the bank will be left with around 8,000 clients in its markets unit, roughly a quarter of the amount it had back in 2014.
Shares in Barclays are trading down 2.4 per cent at 222.65p at time of writing.