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Barclays and chill

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By Owen Sanderson
03 Aug 2017

If you’re a bank chief executive under pressure from shareholders this is the playbook: first, lower expectations and provision everything; second, raise some capital and set out a path to future success. Only then do you try to make some actual money.

Barclays is between step two and three. Had it not tucked away £700m for PPI and lost money selling its African business, it would have had a decent quarter. Chief executive Jes Staley has added top drawer talent and deployed more capital in the investment bank, and the bank has a spring in its step.

But he showed some serious chutzpah in asking shareholders to accept his target of 10% return on tangible equity “over time”. Asked to clarify, CFO Tushar Morzaria said “we’re not going to put a date on it” and pointed out that banks cannot control “the broader economic environment”.

He’s not wrong, but you might expect the C-suite of a global investment bank to have had a few thoughts about how the economy is shaping up.

10% is the target for heavily capitalised post-crisis banks to hit — HSBC and BNP Paribas aim for the same figure, which BNPP has already hit and HSBC is approaching. But these banks set out a rough time frame so that shareholders could judge their success. 

GlobalCapital rather likes Staley’s relaxed approach. We’ve already told the printers that this week’s edition will arrive “over time”, and will shortly be headed out for a lunch that will live in Fleet Street infamy.

For Barclays bankers, too, it’s a target worth cherishing. Part of reaching a 10% return on equity is getting the bank’s cost-income ratio down to 60%, and that means pressure on pay and bonuses. Fortunately, the squeeze isn’t coming yet — that, too, will happen “over time”.

By Owen Sanderson
03 Aug 2017