Barclays PLC (LSE:BARC)’s investment banking division has been an underperformer in recent years, but efforts are underway to improve its financial performance, reckon Shore Capital Markets analysts.
Rather confusingly, Barclays’ investment banking division is split between two core segments- ‘investment banking’ and ‘global markets’ (hence the clunky sentence above).
While global markets (encompassing trading and sales of financial products, including equities, fixed income, currencies and commodities) comprise the bulk of the business, it’s the smaller IB segment that captured Shore Cap’s interest following a management deep dive this week.
The IB segment encompasses advisory and underwriting services on debt and equity capital markets, M&A, and restructuring.
As a fees-based department, IB has suffered at the hands of the global deal downturn following the heady days of the Covid-era bull market.
Shore Cap also suggested that Barclays is losing market share and suffering a fall in productivity in its IB segment, “but a change of leadership and a period of investment in tech and people means that it has recently turned a corner”.
Analysts noted an improvement in Barclays’ financial first half “with more to come”.
“Key areas of opportunity include ECM and advisory, where the group is currently underweight versus larger investment banking peers, along with the US, where management believes the group can better leverage existing client relationships to sell more,” they added.
Market consensus is mixed as to whether Barclays can achieve this, which has put a dampener on the bank’s shares, noted Shore Cap.
This, however, presents a clear upside risk should Barclays prove the naysayers wrong.
Shore Cap has a 'buy' rating on Barclays shares.