Barclays Wants to Ditch Thousands of its Clients

Sure, sometimes less is more. But that usually applies to butter on pancakes or the right amount of cologne, not investment banking ledgers.

Still, according to a new report from the Financial Times, Barclays is considering a Marie Kondo approach to its investment banking business, with the unorthodox route of dropping thousands of clients. But in this case, decluttering is about sparking joy — and cutting costs and boosting profits.

It’s Not You, It’s My Bottom Line

Barclays has been stuck in something of a rut. Its market cap is among the lowest of all international major banks, with its share price sitting near its lowest point since 2020. CEO CS Venkatakrishnan has sought to cut up to £1 billion in costs, and has convened several C-suite meetings this year to explore extreme options to return more capital to investors, such as raising funds to acquire a wealth management business and sunsetting its its US municipal bond trading operations, sources told the FT.

Instead, the bank is veering toward a conscious uncoupling from nearly a quarter of its least-profitable clients in the investment banking division, which has become the bank’s biggest unit. Thanks to current regulations that require banks to hold equity against risk-weighted assets (RWAs), it’s a move that could equate to addition by subtraction:

• The investment banking business accounts for roughly £219 billion of RWAs, or about two-thirds of the bank’s total, per the FT. By dumping as many as 2,500 of the 10,000 total investment banking clients, Barclays could free up as much as 10% of the unit’s RWAs without sacrificing an equal amount in revenue.
• It’s an especially appealing plan, given that the vast majority of the unit’s profits come from only the top 500 or so clients, and because the UK’s looming Basel 3.1 post-banking crisis reforms will place even stricter rules on RWA-capital equity ratios.

Snip-Snip: While the bank considers cutting clients, it’s also locked in on a more traditional method of cost reduction: layoffs. On Tuesday, the bank told staff that it may cut as many as 900 positions before the end of the year, with pink slips specifically focused on back-office divisions such as compliance, risk, finance, legal, policy and IT, according to the trade union Unite, which represents many of Barclays’ UK workers. “Barclays is disgracefully cutting jobs to further boost its massive profits. This is a mega-rich bank that is already on course to make eye-watering profits this year,” the union said in a statement.