Barclays' next chapter may have an M&A twist
13/11/2025 13:10
The author is a Reuters Breakingviews columnist. The opinions expressed are his own. By Liam Proud LONDON, Nov 13 (Reuters Breakingviews) - When C.S. Venkatakrishnan presented his plan for Barclays BARC.L in February 2024, the bank had barely managed a double-digit return for the previous year and was valued at less than half its tangible book value. Now, the CEO known as Venkat can point to a 12% return on tangible equity so far in 2025 and a valuation multiple that has more than doubled. It's a nice context in which to unveil his new upcoming targets, scheduled for this coming February. The next question on investors' and advisers' minds, however, is whether the near future will contain M&A for $79 billion Barclays. Venkat narrowly lost out to Ana Botín's $165 billion Banco Santander SAN.MC earlier this year in the race to buy $3.6 billion UK retail lender TSB. In one sense, it was a double blow for his dealmaking horizons: the Spanish bank's own British unit was one of the most logical possible targets for Barclays. By snapping up TSB, Botín effectively confirmed that her own UK unit was not for sale while simultaneously taking Venkat's other main option off the table. There are reasons to suspect that the former JPMorgan banker may not be done with his dealmaking attempts. One of Venkat's key strategic ambitions, laid out back in February 2024, was to get the investment bank down to about 50% of the group's risk-weighted assets by 2026. It's a worthy aim: the unit that trades securities and advises on deals has often been a lower-returning and more volatile business than UK retail or corporate lending, dragging down Barclays' valuation. Rebalancing the group away from it therefore makes sense. It's also hard work. Venkat has so far gone from 58% to 56%, and analysts reckon he'll only get to 53% by the end of next year. That's partly because he isn't shrinking the investment bank much in absolute terms, perhaps fearing a revenue collapse, meaning that the rebalancing has to come from growth elsewhere. M&A could help. There are few classic retail banks available, but $2.6 billion specialist mortgage lender OSB OSBO.L could work. Buying it would shrink the Barclays investment bank down to 51% of group risk-weighted assets by the end of next year, according to Breakingviews calculations using Visible Alpha data. And while the cost savings would be smaller than with TSB, given the lack of conventional retail banking overlap, Barclays could replace OSB's costly funding model with its own cheap deposits. There's another, entirely separate, M&A possibility that Venkat may soon have to reckon with: a bid from abroad. Barclays' own investors have historically been nonplussed about its investment bank, but there are others who may covet it. Wells Fargo WFC.N, the $270 billion U.S. lender, has Wall Street growth ambitions and is newly freed of a regulatory asset cap. Botín's Santander has also been expanding in investment banking, and now sports a premium multiple of 1.6 times tangible book value, which affords some share-based dealmaking. Buying Barclays, which has a multiple of 1, would catapult Wells or Santander up the league tables. In other words, M&A seems likely to crop up in Barclays' future - one way or another. Follow Liam Proud on Bluesky and LinkedIn. CONTEXT NEWS Barclays will release new financial targets up to 2028 alongside its full-year 2025 results in February. Barclays' investment bank is only slowly shrinking relative to the group https://www.reuters.com/graphics/BRV-BRV/zjpqdkrddvx/chart.png (Editing by George Hay; Production by Shrabani Chakraborty) ((For previous columns by the author, Reuters customers can click on PROUD/liam.proud@thomsonreuters.com))