Barclays is in need of "fundamental restructuring" after disappointing first-quarter results and a series of high-level departures, analysts say—but they are not expecting any great changes when the U.K. lender reveals its strategy update this Thursday.
The bank will hold a conference call for institutional investors and analysts at 10 a.m. London time, which will be listened to with interest after Tuesday's earnings report highlighted ongoing difficulties in its investment banking division.
Barclays reported a 5 percent decline in pre-tax profit for the first quarter to £1.693 billion ($998 million), driven primarily by a reduction in income from the fixed income, currencies and commodities (FICC) unit of its investment bank.
Investment bank income fell 28 percent on the same quarter a year before, with FICC income declining 41 percent. According to Barclays' earnings report, this was due to "subdued client activity, changes in business mix in light of the ongoing strategic review of the investment bank, and a relatively strong first quarter comparison in 2013."
Unveiling Tuesday's results, Barclays Chief Executive Antony Jenkins said Thursday's update "Will address issues underlying the performance challenges we have recently experienced, including positioning the investment bank for the new operating and regulatory environment."
Jason Napier, an analyst at Deutsche Bank, said Barclays' FICC results were the worst of its peers, and that overall, there was ample reason for Barclays to announce large-scale restructuring on Thursday.
"Revenues in the investment bank were very disappointing indeed. Barclays' management has been given all the reason required to embark on fundamental restructuring of the investment bank in particular. With the weakest FICC progression report so far, investors demand nothing less," Napier said in a research note on Tuesday.
Barclays has reported a swath of management changes in recent weeks, adding to speculation that it could announce significant job cuts and downscaling of struggling units on Thursday. Even prior to its latest weak results, Barclays had said it was planning cuts to its investment bank division, and warned it could make up to 12,000 cuts across the bank as a whole this year. Some media organizations are reporting that cuts could be up to 15,000, but Barclays declined to confirm or deny this.
Its recent restructuring announcements have focused on its investment bank, which has seen the resignations of several ex-Lehman Brothers staff, who were absorbed into Barclays when it acquired the failed bank's financial services firm in 2008.
Last month, Barclays reported that Joe McGrath and Richard Taylor had been made co-heads of banking within the investment bank, with Eric Felder as head of markets.
The bank also announced that Joe Gold would replace former Lehman banker, Hugh (Skip) McGee, as chief executive officer of Barclays Americas.
Another member of the ex-Lehman coterie to go is Larry Wieseneck, the head of global distribution and structuring at Barclays, who will depart in June to "pursue other interests".
In addition, the Financial Times newspaper reported this week that Stuart Francis, the head of Barclays' technology banking business, was preparing to resign. He is also a Leman alumnus who worked under McGee.
Despite the resignations, Andrew Coombs of Citi Research predicted Barclays would not announce "large wholesale changes to the existing strategy", noting that its presentation and Q&A session were only scheduled to last two hours in total.
He did forecast however that Barclays would increase the number of underperforming assets it plans to offload into its prospective "bad bank".
"We see… additional downsizing in continental Europe, Asia and emerging markets. We also expect certain product lines—such as commodities—to be downsized," Coombs said in a note on Wednesday. He also said that Barclays would look to offload banking operations in Spain, Portugal, France, and possibly Italy.
Credit Suisse analyst Carla Antunes-Silva warned that markets expectations for Barclays restructuring could be overly optimistic.
"We conclude there is no 'magic wand' for Barclays," she said in a report on the bank.
"Whilst we see moderate incremental value in restructuring… we do not expect the upcoming announcement on May 8 to provide a radical departure from the current plan. What we could see announced on May 8 is an update on the current cost savings plan, with more of a focus on the investment bank."