Shedding non-core and credit-impaired assets by repackaging them into a separate entity would allow it to meet its looming Basel III capital requirements while maintaining high earnings and dividends to shareholders.
Barclays is likely to announce the decision alongside its full-year results in February under new chief executive Bob Diamond, UBS analysts led by Philip Finch said.
“The clearest way for Bob Diamond to stamp his authority upon the group, in our opinion, is to initiate a restructuring at Barclays to exit low-return assets and businesses and deliver a higher return bank with a smaller balance sheet,” they said.
Such a “work-out bank” could include up to £200bn of non-performing mortgages, parts of Barclays Capital or some of its stake in asset manager BlackRock. Barclays would follow Northern Rock, Royal Bank of Scotland and Lloyds Banking Group, all of which have created run-off entities following the credit crunch.