BARCLAYS’ corporate arm will take another five years to hit its return on equity (RoE) targets because of the continued drag from bad loans made in the boom years, corporate chief John Winter said yesterday.
Taking only UK operations, the corporate bank’s RoE came in at 13 per cent in the first quarter of the year, close to covering its cost of equity.
But once overseas operations are added in and the unit is allocated a share of the group’s costs, that fell to an adjusted 6.1 per cent in the three-month period.
“This will take a long time to heal. In 2010 we had impairments in Spain of around €900m (£757m) and revenues of €100m – it is a slow process,” Winter said.
RoE is expected to climb to eight per cent by 2015 before covering cost of equity around three years later.
Winter is also worried rising regulatory costs are holding back improvements in technology and service to the detriment of corporate clients.
The bank is unrolling a new ipad-based system – the iportal – over the next year, but it has been delayed by red tape.
“We are investing hundreds of millions of pounds in this over five years – we are half way through now – in an interactive process with clients,” Winter said.
“But there are also a lot of regulatory changes, with more anti-money laundering screening, for example, which takes a lot of investment and drains resources from the product side and has slowed us. Over half of our strategic investment goes into the regulatory side.”