Barclays Doesn’t Want to Be Cool

livemint.com:

Few themes have been as unpopular among investors in recent years as European investment banking and the U.K. Barclays wants to double down on both. The bank’s shares jumped around 6% Tuesday, despite disappointing 2023 financial results.

Pretax earnings fell 6%, but investors cheered the promise of at least £10 billion, equivalent to around $12.6 billion, in dividends and buybacks between 2024 and 2026, as part of a broader strategic overhaul and cost-cutting campaign. Barclays’s stock trades at around 0.4 times tangible book value—a low valuation matched even by downtrodden Deutsche Bank. Missteps haven’t helped, including its former boss’s relationship with convicted sex offender Jeffrey Epstein and a $361 million hit when employees accidentally issued more structured notes than allowed.

But there is a deeper issue: Barclays is the only big European lender that still apes the Wall Street trading powerhouses. A full 44% of its revenues came from investment banking in 2023. Only Goldman Sachs and Morgan Stanley reported higher percentages.

For mergers and acquisitions and equity deals, Barclays and UBS were the only two European banks to crack the global top 10 last year, according to Dealogic. In the post-2008 era of strict financial regulation, investors prefer financial firms that focus on wealth and asset management, which require little capital and generate high, stable returns. Despite its big investment bank, Morgan Stanley derived 53% of its 2023 revenues from those more attractive areas.

Its stock trades at twice Barclays’s tangible book value. UBS has also given priority to wealth management. Investment banking is particularly out of favor in Europe, where regulation is tighter and players don’t have the scale