BARCLAYS chief executive Bob Diamond promised rigorous action to bring up the bank’s returns at its full-year results presentation yesterday, saying that “there are no sacred cows” in his cost-cutting.
Diamond was keen to address the bank’s “unacceptable” return on equity of 7.2 per cent in 2010, announcing a target of 13 per cent by 2013.
With the bank’s cost of capital currently running at 12.5 per cent, he said that £1bn of savings would be required over the next three years to bring returns above costs.
The savings could come in part from shutting down or selling off “underperforming” businesses, although Diamond did not detail which units could be for the chop.
Overall, the bank’s results beat expectations, with pre-tax profit for the group hitting £6.1bn, up 32 per cent on last year and above a consensus view of £5.7bn. Most of the earnings came from BarCap, which generated pre-tax profits of £4.8bn.
The group was hit hard by the ongoing property crisis in Spain, however. Barclays Corporate recorded a £631m loss on the back of troubles in the Spanish construction and real estate sectors.
“We’re clearly not earning the returns that are acceptable,” said Diamond of the bank’s Spanish division, promising action by its new CEO.
The group’s gross new lending was up by £35bn, plus £7.5bn through the acquisition of Standard Life Bank.