FINANCIALS
- The big levers of UK revenue slowdown, credit quality and global investment bank (IB) production will be focus areas. News from NatWest today was solid on the former two but indications on the latter are more mixed. FICC consensus is -7% q/q which would be one of the better Euro performances but in line with global figures. Equities and primary consensus is for flat revenues, marginally below industry indications so far. US consumer asset quality could also be weaker.
- Strategy in focus (again): payments and private banking. The results of the CEO’s strategic review are set to be outlined. The problem is clear; the IB produces sub-par returns and consumes huge amounts of capital, driving share price underperformance. So far, we know Barclays is looking to sell its merchant payments business (cash generative but low growth) and reported to be looking at buying SocGen’s UK private bank (mirroring Morgan Stanley’s wealth pivot). Improving credit performance requires further derisking (and shrinking of the IB), in our view.
- Barclays’ equity has underperformed Eurobank peers by nearly 20pp over the last year, its CDS continues to trade much wider than Euro Fin Sr IG index and even wider than the corresponding US index (see graphic). Fixing the IB problem would be an effective way to close that gap, in our view.
Results are 0700 London time and conf call is 0830 London time at: https://event.webcasts.com/starthere.jsp?ei=1651263&tp_key=c67f2bfba5
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