Investors push for simplification as Barclays CEO Venkat plans overhaul

Barclays in focus: Barclays CEO CS Venkatakrishnan faces pressure to unveil a plan this month aimed at addressing restless shareholders seeking a streamlined business model and improved, sustainable returns with reduced risk.

With shares down approximately 24 per cent over the past year and facing pressure from stakeholders, Venkat is expected to unveil a plan aimed at delivering higher and more sustainable returns with reduced risk.

The bank's valuation is among the lowest compared to its peers, with underperformance noted in UK and Eurozone banking indexes. 

Shareholders, including notable investors, advocate for streamlining the investment bank, divesting stakes in underperforming businesses, and exiting non-core assets to enhance shareholder returns.

Acknowledging concerns, Venkat expressed intentions to restore balance and clarity within the bank, particularly focusing on the investment bank's contribution to overall profits. However, amid global economic uncertainty, finding buyers for businesses slated for sale poses challenges, as seen with the UK payment business.

Barclays' complex business model has left investors underwhelmed with its risk-adjusted returns. 

Despite efforts to grow its investment bank after the 2008 financial crisis, increased regulatory scrutiny and unpredictable returns have prompted calls to scale back ambitions.

The forthcoming revival plan, due to be presented on February 20 and assisted by Boston Consulting Group, aims to address these concerns. 

Shareholders highlight the investment bank's high costs and uneven returns, with returns on tangible equity ranging from 15.2 per cent to 9.2 per cent over recent quarters.

Investors' faith in Barclays has waned, evident in its low forward price-to-book ratio compared to industry peers. 

Many believe a simpler, leaner bank could yield stronger returns and are supportive of potential asset sales to unlock capital for dividends, buybacks, or strategic investments.

Analysts anticipate Barclays to propose major capital redistribution to improve shareholder value, potentially revising its return on tangible equity target. 

However, scepticism remains regarding the bank's ability to deliver sustainable higher returns, though consistent performance could shift investor sentiment positively in the future.

(With Reuters Inputs)