John McFarlane's five priorities for Barclays

Barclays' new chairman John McFarlane will quickly stamp his authority on the bank by writing to shareholders on Thursday to outline his priorities on the day he succeeds Sir David Walker.

The former chairman of Aviva, who engineered a rapid rebound at the insurer after taking charge during a crisis in 2013, is known by former colleagues as a hands-on and determined leader. One called the 67-year-old a "straight-shooter".

Mr McFarlane has plenty on his plate at Barclays, which has been hit by both misconduct scandals and poor performance at its investment bank. His letter to shareholders will be published at the end of the Barclays annual meeting on Thursday.

Here are five of his priorities.

Legacy issues

Barclays is one of five banks expected to settle allegations that they manipulated the foreign exchange markets in an agreement with the US Department of Justice and several other regulators as soon as next month.

While this could result in a painful fine of several billion pounds, it will remove a major source of uncertainty hanging over the bank's share price.

Mr McFarlane is expected to say that he will push the bank to resolve the numerous outstanding legal issues relating to errors of the past as quickly as possible. Other legal scrapes include a US investigation into its dark pool trading platform and a UK probe into fees paid to Qatari investors that supported its 2008 capital raising.

The investment bank

Rivals in the US and Europe, such as Goldman Sachs and Credit Suisse, have enjoyed a strong recovery in debt and equity trading revenues during the first quarter. Insiders say Barclays is expected to benefit from the same upswing.

However, Mr McFarlane will clearly indicate that the paltry 2.7 per cent return on equity at its investment bank last year is not acceptable. He is likely to indicate that a single quarter's positive results will not be enough to take the pressure off.

The new chairman, who has been on the Barclays board since January, has studied the performance of dozens of individual business lines and has identified several other areas of underperformance beyond the investment bank.

Non-core

Barclays last year dumped unwanted parts of its business into a non-core unit, or "bad bank", including parts of its fixed income, commodities and trading operations as well as retail banking units in Spain, Italy, France and Portugal.

Mr McFarlane plans to bring greater discipline to how the bank's capital is used and will highlight the need to accelerate efforts to shrink this non-core unit, which has been reduced from £110bn of risk-weighted assets to about £75bn.

Returns

Mr McFarlane sees the turnround of Aviva, which resulted in a near-doubling of its share price, as the highlight of a career that includes spells at Citigroup, Standard Chartered and Australia's ANZ.

The Scottish-born chairman aims to achieve something similar at Barclays. He will emphasise the need to improve total shareholder returns through a combination of ruthless cost-control and a more dynamic allocation of capital.

Management

Antony Jenkins this year agreed to take his first bonus since taking over from the controversial American investment banker Bob Diamond in the wake of the Libor interest rate manipulation scandal in 2012.

That is a sign that he feels the bank's performance is starting to turn round. Barclays beat analysts' expectations for 2014 by generating a 12 per cent rise in adjusted pre-tax profit to £5.5bn. But including a long list of exceptional items, the bank slumped to an attributable net loss of £174m last year, against a profit of £540m the previous year.

The hope is that as those exceptional items start to fade away, investors will realise the bank's true earnings power and lift its share price above book value.

Mr McFarlane is not - yet - calling for a change in strategy, more an acceleration of the existing one. But few people - even inside the bank - expect him to be patient with Mr Jenkins for long if the recovery fails to materialise.

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