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Bob Diamond says Barclays should be ‘radical’ on investment bank amid calls to ditch division

Former Barclays chief executive Bob Diamond has called on the lender to be “radical” with its investment bank by either putting more money into the business or selling it.

Many investors have urged Barclays to ditch its global investment bank, which is relatively small compared to the dominant Wall Street firms, and focus more on retail operations.

“They need to be radical – either invest in it or exit,” Diamond told news and data service GlobalCapital.

The investment arm includes part of Lehman Brothers, which Diamond snapped up when it collapsed during the financial crisis.

Although current chief CS Venkatakrishnan has promised to retain the investment arm, Barclays was reported in November to have been exploring a plan to drop thousands of clients.

Venkatakrishnan is due to provide an investor update in February, which will reveal more details about a major cost-cutting strategy, which could reportedly involve as many as 2,000 layoffs.

Some 1,350 roles were already put on the chopping block in 2023, according to employee trade union Unite.

Diamond added that Britain’s banks had generally “become smaller, less productive, with lower returns, and they pay less tax” under harsh government regulation.

He revealed that his private equity firm, Atlas Merchant Capital (AMC), had offered to take the troubled high street lender Metro Bank private in 2020 but was turned down.

AMC instead took a stake in Metro’s bonds and voted on its latest refinancing package, which is designed to shore up the bank’s weak balance sheet.

An improved 8.55p per share reward for 2023 is tipped to rise to 9.74p next year, and again to 11.19p in 2025. The City's profit forecasts for the bank suggest these estimates look pretty realistic too. Dividend cover sits at 3.2 times and 3.3 times for 2024 and 2025 respectively.

My average sp 2.45. Let’s have a good new year

Top investor tells Pearson to ditch London for New York

Cevian Capital singles out educational publisher as next to move to New York

Activist investor argues that the shift would be better for the business

It comes months after it managed to convince CRH to move their primary listing

Pearson's largest shareholder has called for the company to move its listing to the US, in another blow to the London stock market.

Cevian Capital has singled out the FTSE 100 educational publisher as the next company in its portfolio that should make a move to New York.

The activist investor argues that the shift would be better for the business and comes just months after it managed to convince Irish building products group CRH to move their primary listing across the Atlantic.

But the upheaval would be yet another setback to the Square Mile, which has endured snubs from British chip designer Arm, as well as UK commodities broker Marex last week.

Christer Gardell, the founder of Cevian Capital, Europe's largest activist investor, said that joining the increasing number of London-listed companies moving out of the FTSE would be an 'easy and effortless way' to increase Pearson's value.

Pearson, which once owned the Financial Times, has seen its shares flatline, climbing less than 1 per cent in the past five years.

'Pearson is a US company with the majority of sales and executives there,' said Gardell, the managing partner of the Stockholm-based investor which holds a 12 per cent stake in Pearson.

'It is only due to historical reasons it is still listed in the UK.'

Gardell, 63, is a formidable figure whose aggressive style has earned him the nickname 'the Butcher' in the Swedish press. Pearson, which specialises in higher education tools and language learning, makes almost two-thirds of its £3.8billion revenues in the US.

There is a worrying trend of companies falling out of love with London

The mystery of Britain’s dirt-cheap stockmarket

It might be old and unfashionable, but investors are ignoring surprisingly juicy yields

An illustration of a person waving a pair Union Jacks while being squashed by three large magnifying glasses.

image: satoshi kambayashi

Dec 14th 2023

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It is hard to get a man to understand something, wrote Upton Sinclair, an American novelist, when his salary depends on not understanding it. Hard, but not impossible: just look at those paid to promote Britain’s stockmarket. Bankers and stock-exchange bosses have an interest in declaring it an excellent place to list new, exciting businesses, as do politicians. Yet deep down they seem keenly aware that it is doomed.

Government ministers once spoke of “Big Bang 2.0”, a mixture of policies aiming to rejuvenate the City of London and, especially, attract initial public offerings (ipos). But if anyone ever thought an explosive, Thatcherite wave of deregulation was on its way, they do not any more. The new rules are now known as the more squib-like “Edinburgh reforms”. On December 8th the chair of the parliamentary committee overseeing their implementation chastised the responsible minister for a “lack of progress or economic impact”.

In any case, says the boss of one bank’s European ipo business, he is unaware of any company choosing an ipo venue based on its listing rules. Instead, clients ask how much money their shares will fetch and how readily local investors will support their business. These are fronts on which the City has long been found wanting. Even those running Britain’s bourse seem to doubt its chances of revival. Its parent company recently ran an advertising campaign insisting that its name is pronounced “l-seg” rather than “London Stock Exchange Group”; that it operates far beyond London; and that running a stock exchange is “just part” of what it does.

London’s future as a global-equity hub seems increasingly certain. It will be drearier. If everyone agrees London is a bad place to list, international firms will go elsewhere. But what about those already listed there? Their persistent low valuation is a big part of what is off-putting for others. And it is much harder to explain than a self-fulfilling consensus that exciting firms do not list in London.

The canonical justification for London-listed stocks being cheap is simple. British pension funds have spent decades swapping shares for bonds and British securities for foreign ones, which has left less domestic capital on offer for companies listing in London. Combined with a reputation for fusty investors who prefer established business models to new ones, that led to disruptive tech companies with the potential for rapid growth listing elsewhere. London’s stock exchange was left looking like a museum: stuffed with banks, energy firms, insurers and miners. Their shares de

Maybe the dog could have a bite in its tail. Hopefully

UK stock market is riddled with what appear to be huge bargains

Many stalwart companies and funds are looking cheap and trading at discount

You can either calculate this measure using the earnings the company reported last year or using forward earnings predictions based on analyst forecasts.

If you apply this p/e ratio measurement to the FTSE 250 index of the 101st to the 350th biggest companies listed on the London Stock Exchange, some surprising household names appear in the bargain bin. The biggest name is Barclays, trading on a forward price earnings ratio of 4.3 times. This is less than half of the index average p/e ratio of just over ten times. Meanwhile, retirement income provider Just Group is trading on just three times earnings.

Concerns over the health of Britain’s economy has driven Barclays‘s (LSE:BARC) share price through the floor. An argument could now be made that the banking giant is now one of the FTSE 100‘s most attractively valued income shares.

City analysts think earnings will edge 1% lower in 2023. This leaves the company trading on a price-to-earnings (P/E) ratio of 4.6 times, far below the Footsie forward average of 12 times.

The number crunchers expect dividends to continue soaring, too, despite its uncertain trading outlook. This means Barclays shares also offer a prospective dividend yield of 6.2%, a reading that sails above the 4% average for FTSE 100 stocks.

And things get even better on this front for 2024 and 2025. Yields for these years soar to 7% and 8.1% respectively.

Solid forecasts

Of course dividends are never guaranteed, and a sharp fall in profits could play havoc with the bank’s payout record. But based on current earnings forecasts, these estimates look pretty solid.

Last year’s full-year reward of 7.25p per share is expected to rise to 8.55p per share in 2023. Payouts are then tipped to increase to 9.75p next year and to 11.2p in 2025.

Pleasingly, these projections are well covered by anticipated earnings through this period. Dividend cover sits at between 3.3 times and 3.6 times, comfortably above the widely regarded minimum safety benchmark of 2 times.

Barclays’ strong balance sheet gives added strength to near-term dividend projections. Its CET1 capital ratio stood at 14% as of September. This robust figure also sits at the top end of the bank’s 13% to 14% target.

UK banks caught up in Europe's biggest-ever tax fraud of £10billion

Multi-billion pound scam has rocked Germany and is spilling across Europe

It is likely to lead to more claims against banks and individuals in the City

The so-called Cum-Ex case of alleged dividend tax frauds has 2,000 implicated

Europe's biggest ever tax scandal is about to engulf banks in London - and is already worth £10billion in Germany alone.

The multi-billion pound scam, which has already rocked Germany, is likely to lead to more claims against banks and individuals operating in the City.

The so-called Cum-Ex case involves alleged dividend tax frauds that are estimated to have cost German taxpayers alone nearly £10billion.

Up to 2,000 suspects are implicated, many of them bankers, brokers and hedge fund managers based in the City of London. More than a dozen convictions already have been secured in German courts.

Banks under investigation include Britain's Barclays, Bank of America Merrill Lynch, Morgan Stanley of the US, France's BNP and Japan's Nomura, as well as law firms and auditors.

The epicentre of the long-running cross-border probe is Cologne, but it extends much further afield – and is escalating. In a significant development, Danish authorities last week won the right to pursue a £1.4billion alleged Cum-Ex fraud in London after the Supreme Court ruled it could be heard in England.

Experts say the judgment will have profound implications for similar cases being heard. 'This ruling is likely to open the floodgates to claims by other European regulators,' said Prateek Swaika, partner at law firm Boies Schiller Flexner. Banks implicated in Cum-Ex were 'low-hanging fruit', he added.

Cum-Ex was a controversial 'double-dipping' trading strategy that exploited a loophole in how dividend tax was collected so that multiple investors could claim refunds on a tax that was only paid once.

Shares were borrowed just before a company was scheduled to pay dividends. This meant more than one investor could claim bogus tax refunds. The dividend-stripping practice was abolished in Germany in 2012.

Ulrich Bremer, chief public prosecutor in Cologne, told the Mail on Sunday his office had '120 investigations pending against at least 1,700 defendants'. The backlog is such that a new, £40million courthouse dedicated to hearing Cum-Ex cases is being built near Bonn.

Number of Hedge Fund Investors In Q2 2023: 15

Barclays PLC (NYSE:BCS) is a British band headquartered in London, the United Kingdom. September 2023 was a rather historic month for the bank as Morgan Stanley upgraded the stock to Overweight for the first time in more than five years after its previous downgrade in January 2018 according to Bloomberg's data.

As of Q2 2023 end, 15 out of the 910 hedge funds polled by Insider Monkey had invested in Barclays PLC (NYSE:BCS). Its largest stakeholder among these is Peter Rathjens, Bruce Clarke, and John Campbell's Arrowstreet Capital as it owns 16.4 million shares that are worth $129 million.

Janus Henderson Group plc (NYSE:JHG), Barclays PLC (NYSE:BCS), UBS Group AG (NYSE:UBS), and Deutsche Bank Aktiengesellschaft (NYSE:DB) are some European bank stocks that hedge funds are piling into.

Barclays to step up share buybacks 'if board wants to address weak shares'

If Barclays PLC (LSE:BARC) bosses want to address the bank’s share price weakness, buybacks are the answer, according to analysts at Jefferies.

Reports in the media reports earlier this month suggested that management has engaged Boston Consulting Group for a new strategic review to address weakness in the share price.

Areas upon which this review might focus would be “rear-view mirror issues” such as the capital consumed by the investment bank or optionality in the banks 'payments' businesses.com, the analysts said.

But they instead say the bank’s structure “demonstrated its worth during the pandemic” as strength from the markets business enabled large scale balance sheet provisions to be built as a “financial ballast” and with the diversified business mix generating an average 12% reported return on capital employed over the past eight quarters.

While the increased capital allocation to the investment bank attracts scrutiny from investors, “the fact of the matter is the CIB generated an average 17% ROE over the past eight quarters”.

What’s more, they add, “opportunities to allocate more capital elsewhere are scarce”, pointing to the outlook for UK loan growth that is “not particularly compelling” though likely to remain highly cash generative.

“The bottom line is that management's focus ought to be on returning incremental capital to shareholders.”

Estimating that around £19bn of profit could be generated between now and 2025, the analysts said they believe “more of this should be returned to shareholders to better address the share price weakness as opposed to another strategy review”.

The buyback forecast from Jefferies has been upped to £2.2bn in each of 2024 and 2025 from an estimated £1.5bn in 2023, with a further £3.3bn of dividends forecast over the period, while keeping a CET1 capital ratio buffer at around 14%.

The Barclays share price forecast for the next 12 months has the highest price target at GBX 320.00p, the lowest price target at GBX 180.00p, providing an average price target of GBX 242.27p. At the time of writing this presents a near 48% uplift to the average price target for Barclays share price.21 Jul 2023

Nat west shares having a good day, poor Barclays same as any other day, start of then nose dive.

Barclays CEO Venkatakrishnan: Financial assets are relatively stable

Barclays CEO C.S. Venkatakrishnan joins 'Squawk on the Street' to discuss the company’s new credit card partnership with Xbox, the state of the banking industry, and more.

Read in CNBC: https://stocks.apple.com/A00P7Y1_SQVGvKl4i3MRnHA

Barclays Joins Citi, HSBC Eyeing Deals in Complex Debt Swaps

Bank is now exploring several deal ‘situations’ with clients

Barclays estimates ESG swap market can reach $800 billion

Is Barclays Worth Keeping An Eye On?

You can't deny that Barclays has grown its earnings per share at a very impressive rate. That's attractive. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. We should say that we've discovered 2 warning signs for Barclays (1 is significant!) that you should be aware of before investing here.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features.

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Barclays (LON:BARC). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

How Fast Is Barclays Growing Its Earnings Per Share?

Barclays has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. Barclays' EPS shot up from UK£0.29 to UK£0.37; a result that's bound to keep shareholders happy. That's a fantastic gain of 26%.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Not all of Barclays' revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. It seems Barclays is pretty stable, since revenue and EBIT margins are pretty flat year on year. That's not a major concern but nor does it point to the long term growth we like to see.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Barclays.

Are Barclays Insiders Aligned With All Shareholders?

Since Barclays has a market capitalisation of UK£25b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. As a matter of fact, their holding is valued at UK£31m. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 0.1%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Is Barclays Worth Keeping An Eye On?

Troubles at Barclays Prompt a Shake-Up—and Banker Exits

Fifteen years after its fire-sale purchase of Lehman Brothers jump-started its investment banking business, the British lender is still trying to find its footing

Second part

After defeating a push by activist investor Edward Bramson to shrink its investment bank in 2021, the 330-year old lender has stuck to its transatlantic universal banking model spanning investment banking, and consumer and corporate lending, gradually growing group profits.

But a recent shake-upat its investment bank has raised concern about Barclays' ability to compete amid a worldwide dealmaking slump.

A U.S. securities trading blunder that triggered a $361 million regulatory penalty and blighted recent earnings remains a drag on shareholder confidence too.

That has made investors "nervous about investment over the simple maths of buying back shares at half book value," said Richard Buxton, investment manager at Jupiter Asset Management (JUP.L), a top 25 Barclays shareholder, according to Refinitiv.

"I can understand why Barclays wants to invest more behind sub-scale businesses if they can evidence getting the returns from them," he added.

Some smaller investors hope the BCG review might offer a fresh take on whether an investment banking spinoff could give shareholders the value they crave.

"You might get a better valuation if you demerge the investment bank ... They are not valued properly together," said Alan Beaney, chief executive at RC Brown Investment Management, which has held Barclays shares since 2012.

A Barclays spokesperson said the bank's businesses continued to perform well and its business mix was "robust".

OVERHAULS

Barclays has also engaged another global consultancy to analyse whether some of its payments businesses should be expanded or combined with other providers, Reuters reported in June.

Meanwhile, Barclays' stock has fallen around 3.5% this year, underperforming a 10% gain in a benchmark index of European banks (.SX7P) and internationally-focused European rivals like BNP Paribas (BNPP.PA) and HSBC, which have risen by around 5.5% and 18% respectively.

Barclays underwent several major overhauls in the decade following the 2008 financial crisis, including a 2014 jobs cull and a 2016 exit from Africa.

But while such strategies have helped to keep Barclays in the black throughout the pandemic and the current bout of inflation-led economic malaise, management faces a battle to convince investors they can depend on those returns.

Barclays' goal is to hit a return on tangible equity, a key measure of profitability, of more than 10%. While its British retail and business banking arm delivered 18% in 2022, the two other divisions which house payments and investment banking narrowly scraped the 10% goal.

"We estimate the bank ought to be able to generate around 19 billion pounds of profit over the course of 2023-2025, and we believe more of this should be returned to shareholders to better address the share price weakness as opposed to another strategy review," Jefferies analysts said in a note.

Barclays (BARC.L) is betting it can revive its wilting share price by upping investment in a crop of its smaller businesses including U.S. credit cards, sources familiar with the matter said. But some of its top shareholders would prefer the quicker fix of a buyback.

Chief Executive C.S. Venkatakrishnan is studying plans to allocate more capital to the bank's wealth management, U.S. credit card and global payments activities to boost returns, according to people familiar with his thinking and reported here for the first time, after drafting in Boston Consulting Group (BCG) to review strategy earlier this year.

A team of BCG consultants has taken up temporary residence at the bank's headquarters in London's Canary Wharf financial hub to help management brainstorm an optimal investment plan, one source familiar with the BCG review said.

The lender is pursuing an in-house review as well, the source added.

Another source inside Barclays' investment bank, talking anonymously because they are not authorised to speak to the media, said lower staff attrition at its technology and back office operations had started to worry cost-conscious managers.

The BCG review could lead to layoffs, the source familiar with the review said, although no decisions have been made.

"As you would expect, we frequently work with various external consultants," a Barclays spokesperson said.

A spokesperson for BCG declined to comment.

Some top Barclays investors, however, told Reuters they would have misgivings about a plan to prioritise investment over capital distributions.

They question the logic of pumping more capital into divisions that are small relative to their competitors as the global economy shivers and the lender's shares suffer.

Instead, they want to see tighter cost control, twinned with bigger buybacks and dividends after the bank completed a modest 500 million pound ($646 million) buyback programme in April.

"We are keen to see the businesses we invest in acquire and grow if they can do so in a way that adds shareholder value," said Richard Marwood, senior investment manager at Royal London Asset Management, one of Barclays' 30 largest shareholders, according to Refinitiv.

"The hurdle they have to clear is: are the acquisitions better uses of capital than retiring equity? When your shares are lowly valued, that is a tougher benchmark to beat."

'NERVOUS'

For Venkat, as the veteran banker is commonly known, the stakes are high.

Two years into his tenure, Barclays' stock price to tangible book value, a measure of market value against assets, is 0.54, the lowest among major British banks and well below rival HSBC's (HSBA.L) 0.87, Refinitiv data shows.

Barclays emerged from the 2008 financial crisis with a once-in-a-generation opportunity to bulk up on Wall Street, after buying Lehman Brothers' U.S. operations. But nailing the right business mix to woo new investors without repelling its more conservative backers has challenged executives ever sinc