Barclays to Cull 7,000 Clients

Barclays Plc is preparing to tell 7,000 clients to do more trading with the firm or find another bank, the latest move in an industrywide trend of winnowing down customer lists to the ones that produce significant profits.

The British bank launched a new computer system, called Flight Deck, this month that ranks every customer of its trading unit by the return they generate on the firm’s capital, allowing Barclays to prioritize its most lucrative relationships and jettison those that have become a drag.

Since 2014, the bank has culled 17,000 clients as tougher capital rules make dealing with many smaller firms less profitable, and the new system has identified a further 7,000 that may need to go, Bloomberg reported.

Global investment banks have been cutting ties with smaller clients and scrambling to capture a greater share of business from the world’s elite fund managers as new rules led the industry to rethink its traditional focus on revenue. Lenders from Citigroup Inc. to HSBC Holdings Plc are instituting strictly tiered client lists, lavishing attention on the handful of money managers at the top while reducing the time spent with the least active players.

“We have the returns figures, so we can go and have those tough conversations with clients that don’t meet our hurdle rates,” Kashif Zafar, the London-based co-head of global distribution and co-head of macro products, said in an interview. “We’re not in the old-school business of doing big revenue with poor returns. That’s a failing strategy.”

As a general rule, Barclays wants at least a 10% return on capital from every customer, Zafar said. Those that don’t currently meet the threshold will be given the option to do more business with the bank to get there; if they can’t or won’t, they’ll have to leave in what the bank terms a managed transition.

Barclays is embarking on its second round of pruning as the industry follows suit. Deutsche Bank AG is scaling back coverage of about 3,400 customers in the markets business, a person familiar with the move said this month. Morgan Stanley ranks its most profitable European fixed-income customers in three groups: “supercore”, “core” and “base”. Citigroup Inc.’s top five hedge-fund clients form an elite group known as the “Focus Five”, according to people with knowledge of the list.