Barclays PLC BARC

Barclays is one of the three largest banks in the United Kingdom and has expanded around the world. Its large market share in its entrenched businesses--retail and business banking, credit cards, and investment banking--helped the firm to generate hefty returns during the boom years. Despite the financial crisis and the now changed banking landscape, Barclays has continued to focus on high-profile but risky businesses such as investment banking through Barclays Capital (about half of pretax profits in 2011 and 2012, but 80% in 2010) and international retail and commercial banking. As a result, it has struggled to bring compensation costs in line with revenue and has suffered embarrassing risk management lapses. We're hopeful that the recent Libor rate-rigging scandal will have a silver lining by prodding the bank to pull back from its riskiest activities. Already, the scandal has resulted in new management, with Antony Jenkins and David Walker now in place as CEO and chairman, respectively. We think their past work in retail banking and banking ethics portends a new road ahead for Barclays.