MEMO FROM THE FUTURE: BARCLAYS
CEO Edition
BOARD STRATEGY SESSION June 2030
TO: Barclays Board of Directors
FROM: Colm Kelleher, CEO
DATE: June 2030
SUBJECT: AI-Powered Investment Banking and the Decline of UK Retail Banking
OPENING
Barclays has a bifurcated strategy: world-class investment banking and capital markets on one side, consumer and retail banking in the UK on the other. The investment banking side is thriving with AI. The retail banking side is struggling, pushed by digital disruption and changing consumer behavior.
This memo proposes a clear strategic choice: double down on investment banking while managing the decline of retail banking profitably.
THE REALITY
Investment Banking with AI: - Trade execution: AI algorithms execute trades 40% faster, capturing micro-opportunities - Risk management: AI models predict market stress 30% more accurately - Client analytics: AI helps identify cross-selling opportunities in corporate client bases - Compliance: AI scans communications 20x faster for regulatory violations
Revenue: Barclays investment banking up 18% YoY. Margins expanding.
UK Retail Banking: - Digital adoption: 75% of transactions now digital (up from 35% five years ago) - Branch traffic: Down 45% in five years - Customer acquisition cost: Up 3x due to digital competition from Wise, Revolut, Plaid - NIM compression: From 1.8% to 1.2% as competition intensifies
Revenue: Barclays UK retail up 2% YoY (flat in real terms). Margins contracting.
The divergence is stark. We're allocating capital to the wrong side of the business.
WHERE WE ARE
Current portfolio: - Investment Banking & Markets: 65% of profit, 40% of capital - UK Retail Banking: 25% of profit, 45% of capital - International Retail: 10% of profit, 15% of capital
Financial performance: - Total revenue: £34 billion - PNPL: £8.2 billion - Dividend: 5% yield - Stock: Trading at 0.85x book value - CET1: 14.2%
The strategic problem: We're maintaining expensive retail infrastructure that's becoming economically obsolete while under-investing in investment banking, which is growing and profitable.
THE OPPORTUNITY
Opportunity 1: AI-Powered Investment Banking Expansion
The play: Use AI to become the dominant investment bank in EMEA, capturing market share from American competitors.
How: - Expand algorithmic trading with AI-designed strategies (capture 3-5% of additional market share) - Use AI for client analytics to drive cross-selling (advisory, M&A, capital raising) - Build AI-powered risk management systems (reduce regulatory capital requirements 50-100 bps) - Deploy AI for regulatory compliance (reduce compliance costs 20-30%, lower regulatory risk)
Estimated impact: - Investment banking revenue grows 12-15% annually (vs. 8% today) - Risk-adjusted margins expand from 35% to 42% - Regulatory capital freed up by better risk models: £2-3 billion (can be redeployed)
Timeline: 18-24 months to full deployment
Profitability: 35%+ ROI on AI infrastructure
Opportunity 2: Manage UK Retail Decline Strategically
The play: Accept that UK retail banking is mature, manage it for cash while reducing costs 25-30%.
How: - Rationalize branch network from 1,100 to 600-700 branches (focus on profitable locations) - Shift customer base to digital-only (encourage migration through pricing and UX) - Exit low-margin products (basic savings accounts, commodity mortgages) - Focus on profitable segments: mortgages for high-net-worth customers, premium checking
Estimated impact: - Reduce operating costs by £2-3 billion annually - Reduce headcount by 15,000-20,000 (via natural attrition and redeployment) - Improve retail ROE from 6% to 12% - Free up capital for investment banking expansion
Timeline: 3-4 years to complete restructuring
Profitability: 25% cost reduction, improved margins
Opportunity 3: Build AI-Powered Financial Services Adjacent to Banking
The play: Create new services that leverage our banking license and client base: wealth management, insurance, lending, investment products.
How: - AI-powered wealth management: Robo-advisors for mass affluent clients, AI portfolio optimization - AI-powered insurance: Use client data to create highly targeted insurance products and pricing - Alternative lending: AI credit underwriting for SMEs and consumer lending - Investment products: AI-designed thematic ETFs and structured products
Estimated impact: - New revenue streams: £1-2 billion annually by 2035 - High margins: 40-50% gross margins on wealth and insurance products - Cross-sell opportunities: Increase share of wallet with existing customers 25-30%
Timeline: 2-3 years to launch first products
Profitability: 40%+ ROI, high-margin revenue
MY RECOMMENDATION
Three-part strategy: Expand investment banking aggressively, manage UK retail for cash decline, and launch AI-powered services.
This is honest about the future of retail banking in the UK. It's not coming back. But investment banking and financial services can grow substantially.
EXECUTION PLAN
Phase 1: Investment Banking AI Deployment (2030-2032)
- Deploy AI across trading, client analytics, risk management, compliance
- Expand EMEA presence and gain market share
- Target: 12-15% annual growth
Investment: £1.5-2 billion in AI infrastructure
Phase 2: UK Retail Rationalization (2030-2034)
- Close 400-500 branches
- Migrate customers to digital
- Reduce headcount 15,000-20,000
- Target: £2-3 billion annual cost reduction
Phase 3: Financial Services Expansion (2032-2035)
- Launch wealth management, insurance, lending, investment products
- Scale to £1-2 billion annual revenue
- High-margin, high-growth business
FINANCIAL IMPLICATIONS
By 2035:
- Investment Banking revenue: £18-22 billion (up from £10B today)
- UK Retail revenue: £8-10 billion (down from £8.5B today, but more profitable)
- Services revenue: £1-2 billion (new)
- Total revenue: £28-32 billion (down 5-10%, but profitability up significantly)
- PNPL: £10-12 billion (up from £8.2B today)
- ROE: 12-14% (up from 8% today)
Stock target: £7.50-8.50 by 2035 (from £6.20 today), reflecting higher ROE and profitability.
Colm
Confidential — Board of Directors Only