By Margot Patrick
LONDON-- Barclays PLC Executive Chairman John McFarlane sketched
out a cautious turnaround plan on Wednesday but made one thing
clear: The British bank won't be going toe to toe with big Wall
Street firms in markets around the world.
In announcing a sharp rise in second-quarter profit, the interim
head of the bank scrapped a plan to raise the dividend and said he
was "personally pleased" with the performance of the firm's
investment bank. He reinforced previous comments from bank
officials that the days of Barclays competing in most global
markets are likely over.
The big U.S. banks "have scale that we no longer have to be
global," said Mr. McFarlane. "I wouldn't say that we have an
ambition to be global, we don't. That's the reality of the world
now."
Instead, he said, Barclays would focus on improving performance
in its three core markets of the U.K., U.S. and South Africa.
Mr. McFarlane said the bank would retain capital and hold its
dividend steady at 6.5 pence a share this year, as well as shed
unwanted assets more quickly, to help break a cycle of sluggish
revenue growth and high costs since the financial crisis.
The move came as the lender reported a sharp rise in
second-quarter net profit to GBP1.15 billion ($1.8 billion) from
GBP161 million in the same period last year. The second-quarter net
profit figure was helped by a one-time, GBP496 million gain on
Barclays's acquisition of parts of Lehman Brothers in 2008, while
the second quarter last year was held back by higher operating and
restructuring costs.
Mr. McFarlane, who fired Antony Jenkins as chief executive
earlier this month and is temporarily running the bank, said
Barclays would eventually return to paying higher dividends by
improving revenue growth, investing capital more effectively and
cutting costs.
"A high and progressive dividend will in future need to make up
a significant portion of our annual total shareholder return," Mr.
McFarlane said. With the stock price still hovering at 2009 levels,
"shareholders have been incredibly patient," he added.
In holding the dividend Barclays abandoned its earlier payout
target of 40% to 50% of earnings. The bank also said there aren't
any plans to raise capital from shareholders.
On Barclays's investment bank, a key area of uncertainty for
shareholders, Mr. McFarlane said the strategy would remain largely
the same, with operations focused around the U.S. and U.K. and to a
lesser extent Asia. He said a new plan had been agreed to refine
the investment bank's strategy, building on "what we are good at
and where we are good at it."
Second-quarter revenue at Barclays's investment bank was flat at
GBP2.15 billion. Lower restructuring costs helped drive a 35% rise
in the unit's pretax profit in the period, but returns on equity
are still lagging those in Barclays's other businesses.
In retail and corporate banking, Barclays posted a 9% fall in
adjusted profit before tax, to GBP709 million from GBP780 million,
as operating costs rose. The number strips out a new, GBP850
million provision in the second quarter to compensate U.K.
customers for missold products including payment protection
insurance on loans.
The strategic plans announced Wednesday were made three years
into a prolonged period of transition at Barclays after an era of
high returns from its once-huge investment bank was ended by rising
capital requirements and the exit of former CEO Bob Diamond in
2012.
Mr. Jenkins proved to be a stopgap CEO, helping the bank improve
its culture and standards but never fully convincing shareholders
or analysts that Barclays had figured out how to adapt to a changed
banking industry. He was fired on July 8, with Mr. McFarlane saying
Barclays "urgently required" a different person running the
bank.
Analysts at Citigroup said the flat dividend guidance is
"slightly disappointing, but understandable in the context of a
faster noncore run down strategy." Barclays shares rose 1.8%,
underlining a 13% rise since Mr. McFarlane stepped in as the bank's
boss.
Mr. McFarlane's appointment as chairman this spring was greeted
enthusiastically by shareholders, who had high expectations after
his previous successes in turning around other financial companies
including insurer Aviva PLC.
Nicknamed "Mack the Knife," Mr. McFarlane wasted little time in
overseeing Mr. Jenkins's departure. He will now be judged on his
ability to improve returns in Barclays's core businesses, which
consist of U.K. retail and commercial banking, U.S. and European
investment banking, credit cards and Africa.
Max Colchester contributed to this article.
Write to Margot Patrick at margot.patrick@wsj.com
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