Barclays Rises on Plan to Unveil Cost-Cut Update Next Month

Apr 17, 2014 12:32 pm ET

(Closes shares.)

April 17 (Bloomberg) -- Barclays Plc, the U.K.’s second- biggest bank, rose in London trading after saying it will update shareholders on the “positioning” of its investment bank and plans to control costs next month.

Chief Executive Officer Antony Jenkins and Finance Director Tushar Morzaria will speak to analysts and investors about strategy across the businesses on May 8, the London-based bank said in a statement today.

The shares rose 3.8 percent, the most since July. Jenkins, facing investor anger over Barclays’s banker compensation levels, is also struggling to make progress on a profitability target after the company raised 5.8 billion pounds ($9.8 billion) in a rights offering in October. Barclays said it will show how it plans to “deliver improved and sustainable returns and growth for shareholders.”

“Barclays needs to provide a path to meeting the cost of capital within the investment bank, and to do that it needs to get the cost base in better shape -- there’s no visibility on that right now,” said Vivek Raja, an analyst at Oriel Securities Ltd. in London. Today’s announcement “does mean management will have a strategy with which to go to shareholders,” he said.

Barclays also named Eric Felder head of markets and said Joe McGrath and Richard Taylor will be co-heads of banking, reporting to investment bank chiefs Tom King and Eric Bommensath, according to a separate e-mailed statement.

Barclays shares rose 8.95 pence to 246.5 pence in London. They have dropped 9.4 percent this year.

Exiting Businesses

Jenkins said in a memo today that Barclays was considering what businesses it should focus on. The bank this year started another review of its investment bank and may cut more jobs and exit unprofitable businesses amid toughening industry regulation, a person with knowledge of the company’s thinking said in March.

Jenkins will face shareholders at its annual meeting on April 24. The strategy update will also follow the release of first-quarter earnings on May 6, Barclays said.

Return on average equity at the securities unit, a measure of profitability, fell to 8.2 percent last year from 13 percent in 2012, below Jenkins’s target of at least 11 percent in 2015. Compensation as a proportion of investment-banking revenue rose to 43.2 percent in 2013 from about 40 percent the previous year. That’s short of the 35 percent target he set for 2015.

A spokeswoman for Barclays declined to comment beyond today’s statement.

--With assistance from Ambereen Choudhury in London and Elisa Martinuzzi in Milan.