Barclays urged to sell US investment bank and cards businesses

BARCLAYS should sell its US investment bank and cards business, as well as its African business, to boost its capital position and return the bank to healthy growth, it has been claimed.

The call is by analysts at Bernstein Research, in a strongly worded open letter to Jes Staley, the bank’s new American chief executive.

It indicates the extent of Barclays’ problem convincing parts of the market it is on the right path. Its shares are currently trading at 174.6p, down almost 40pc in the past six months, valuing the bank at 0.6 times its book value.

Jefferies analysts have also joined the criticism, suggesting Barclays should sell the African unit and scrap its year-end dividend to shareholders, again to bolster its capital position.

Jefferies’ Joseph Dickerson, who expects a 1p dividend to come alongside the 2015 full-year results later this month, said: “Given the reduced earnings profile of the bank… we now believe it unlikely that it will be able to sustain ordinary dividend payouts in 2016 and 2017.”

However, Barclays and Mr Staley are considered to be unlikely to abandon such large swaths of the business, when they have major plans, particularly in parts of the US operations.

Scrapping the year-end dividend would also mark a major change of tack for the bank. Bosses at Barclays have made it clear that they want a “progressive dividend” policy, partly in response to pressure from shareholders for greater payouts in the near future.

One other option to improve the capital position would be to sell some or all of Barclays’ African operations. Executives are considering the future of the African unit, which was built up as a bet on the high-growth future of emerging markets, but has also been troubled by the weakness of the rand and political turmoil in South Africa.

The most radical proposals from Bernstein are to sell off major chunks of the US business. The letter said: “It probably wouldn’t have taken you too long to figure out that the elephant in the room is the investment bank. It needs major surgery. Shrinking to profitability – the European broker-dealer trade – is possibly one of the worst strategies ever in the history of banking.”

Bernstein also wants Barclays to sell its US cards business, arguing that it is “a subscale business” with “a bunch of patchy portfolios”.