Bloomberg News

Barclays Eyes as Much as $10.4 Billion Extra Revenue by 2013

June 15, 2011

(Updates with comment from finance director in final paragraph.)

June 15 (Bloomberg) -- Barclays Plc, the U.K.’s second- largest bank, said it intends to generate additional revenue of as much as 6.4 billion pounds ($10.4 billion) by 2013.

The bank is still seeking a return-on-equity of 13 percent, it said in a statement today before a presentation to investors. Between 4.3 billion pounds and 6.4 billion pounds extra income will be sought compared with 2010, the bank said.

“This looks like a pretty ambitious target to set,” Alex Potter, an analyst at Berenberg Bank who has a “buy” rating on the bank and a 310 pence a share target, said. “They’re going to have to give the market quite a lot of detail on exactly where this is coming from before the market will believe them.”

Chief Executive Officer Robert Diamond cut Barclays’s return-on-equity target in February to 13 percent from an average of 18 percent over the past three decades as higher capital requirements from regulators erode profitability. Diamond that month described the bank’s 2010 returns of 7.2 percent as “unacceptable.”

“The presentations reaffirm the Barclays target return-on- equity of 13 percent by 2013 and outline a number of new targets,” the statement said.

The bank traded down 2.7 percent to 257.4 pence at the close in London, the biggest decline in the FTSE 350 Index of the U.K.’s five largest banks.

‘Stark Disparity’

“It looks like the current share price is equivalent to a return-on-equity of 7.5 percent,” said Cormac Leech, an analyst at Canaccord Genuity Ltd., who has a “buy” rating on the stock. “So there’s a stark disparity between management’s expectation of the business and the current share price.”

Barclays’s European consumer banking business had a return on equity of zero last year, compared with 11 percent in the U.K. and 12 percent in Africa the bank said.

“The problems in Europe are significant, we all know that,” said Antony Jenkins, head of retail, when asked about the bank’s performance on the continent. “Our base case assumption is that those problems are not going to unwind themselves any time soon.”

Barclays plans to eliminate 700 jobs at its Spanish consumer unit, a person with knowledge of the matter said last month. The London-based bank also has units in Portugal, Italy and France.

The lender will budget operating expenses of 16.8 billion pounds by 2013, saving at least 1 billion pounds in costs, it said.

Barclays forecast as much as 2.4 billion pounds, or 38 percent of its targeted 6.4 billion pounds of additional revenue will come from Barclays Capital, while retail and business banking will contribute as much as 2 billion pounds, Finance Director Chris Lucas said. Its corporate banking and wealth management units may each add as much as 1 billion pounds, Lucas said.

--Editors: Jon Menon, Steve Bailey

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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