Barclays corporate bank needs five years to meet RoE target

Barclays will take another five years to reach its corporate bank's return on equity (RoE) target as bad loans in Spain drag on its performance, according to head of the unit John Winter.

Barclays will take another five years to reach its corporate bank's return on equity (RoE) target as bad loans in Spain drag on its performance, according to head of the unit John Winter.

The bank is working to achieve a RoE above its cost of equity, which is 11.5%, by 2015.

However, Winter said the corporate bank is only expected to recover to 8.0% by then and improve by 1.5-2 percentage points a year thereafter.

"No-one's high-fiving each other over 8.0% RoE. But there's a great business here struggling to get out," Winter told Reuters.

Barclays Corporate, which provides services to businesses and financial institutions, has lost £2.1bn on bad loans in Spain in the past three years.

The unit contributes 10% of group revenue but its RoE has been below the bank's cost of equity for years. Last year RoE was just 2.9%.

RoE is a key measure of profitability. It is meant to be at least equal to the cost of equity, the return a bank pays to investors to compensate them for the risk they are taking.

Winter has been trying to turn the unit around since taking charge in 2009 and is shrinking the business in Spain to focus on clients with cross-border needs.

He said the bank had sold two parcels of Spanish loans at a significant discount. But instead of selling further loans at heavily slashed prices, the unit will try to regain value over the longer term, Winter added.

RD

Recommended

Share tips of the week – 24 September
Share tips

Share tips of the week – 24 September

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
24 Sep 2021
Three strong Asian stocks trading at bargain prices
Share tips

Three strong Asian stocks trading at bargain prices

Professional investor Nitin Bajaj of the Fidelity Asian Values investment trust picks three stocks that dominate their industries, earn good returns o…
20 Sep 2021
Why it pays to face up to your investment mistakes
Investment strategy

Why it pays to face up to your investment mistakes

Buying stocks can be a complicated business. But selling stocks can be tricky, too – even if you sell for the right reasons. Max King explains how to …
17 Sep 2021
Share tips of the week – 17 September
Share tips

Share tips of the week – 17 September

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
17 Sep 2021

Most Popular

A nightmare 1970s scenario for investors is edging closer
Investment strategy

A nightmare 1970s scenario for investors is edging closer

Inflation need not be a worry unless it is driven by labour market shortages. Unfortunately, writes macroeconomist Philip Pilkington, that’s exactly w…
17 Sep 2021
Two shipping funds to buy for steady income
Investment trusts

Two shipping funds to buy for steady income

Returns from owning ships are volatile, but these two investment trusts are trying to make the sector less risky.
7 Sep 2021
What really causes inflation? Here’s what prices since 1970 tell us
Inflation

What really causes inflation? Here’s what prices since 1970 tell us

As UK inflation hits 3.2%, Dominic Frisby compares the cost of living 50 years ago with that of today, and explains how debt drives prices higher.
15 Sep 2021