February 12, 2013 11:46 am

Barclays without the bark?

New business model is not radically different from existing one

Antony Jenkins must be a relieved man. The Barclays chief executive spent Tuesday explaining his much-anticipated vision of what the Barclays of the future will look like, and was met by a 7 per cent jump in the share price. A wide ranging cost-cutting plan – costs will be a tenth lower by 2015 – and soothing noises about capital were to thank.

If Mr Jenkins can deliver what he is promising, Barclays could look like a more attractive investment by 2015 (when all the changes should be done) than it does today.

If the cost to income ratio falls from 64 per cent to the mid 50s, as promised, and costs fall by a tenth to £17bn, as promised, then the bank should be generating revenues of £30bn in 2015. Assuming impairments remain flat, that would create diluted earnings per share of 52p – a mouthwatering increase over the 34p reported in 2012. That level of earnings gives Barclays a 2015 PE ratio of 6, well below the average for European banks, even after Tuesday’s share price rise.

But before getting carried away with the scale of the changes, there are two things to note. First, it is not a given that Barclays can generate revenues of £30.5bn in 2015. In 2012 the number was £29bn, and out of that the bank will lose almost £1bn in revenue from businesses that it is closing or scaling back. Increasing revenues by 9 per cent in the next three years is achievable if the economy recovers, but a stretch if not – over the past three they have fallen by 6 per cent.

Second, while Mr Jenkins talks grandly about the importance of the new, more ethical culture at Barclays, this is broadly the same bank that Bob Diamond left behind – big in UK retail, big in UK investment banking, big in US equities, not so big elsewhere. He is trimming exposure to some of the more peripheral businesses but he is only exiting four operations out of a total of 75. The Barclays of tomorrow promises to indulge its shareholders a bit more and its staff a bit less. But it will not be a radically different bank to the Barclays of today.

Email the Lex team in confidence at lex@ft.com

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