It’s Crunch Time for One of Europe’s Last Big Wall Street Players

LONDON—Two years ago, C.S. Venkatakrishnan was unexpectedly thrust into the top job at British banking giant Barclays. A year later, he felt a lump on his neck and was diagnosed with cancer.

Now, after successfully undergoing treatment, Venkatakrishnan faces a career-defining test. The Indian-born risk specialist is trying to succeed where his predecessors failed, to persuade investors that Barclays’s eclectic mix of Main Street finance and Wall Street heft makes sense.

He is preparing to unveil his blueprint for the bank alongside annual results due Feb. 20.

Venkatakrishnan, 58 years old, took over as chief executive in November 2021, after then-CEO Jes Staley resigned over his ties to convicted sex offender Jeffrey Epstein.

Since then, Barclays shares in London have fallen by more than a quarter. Dozens of top bankers quit last year for other institutions. Consumer balances at its vaunted credit-card arm are down sharply since the pandemic, while competition is mounting in Main Street banking in Britain—including from Venkatakrishnan’s old employer, JPMorgan Chase.

Barclays has one of the biggest investment banks of any non-U.S. player, advising on mergers and stock offerings, and executing market trades.

While Venkatakrishnan has sought to play down expectations of a major restructuring, he says he wants to shift the focus elsewhere, and has acknowledged the company’s weak share price is a problem. In an early sign of that emphasis, he is splashing out more than $750 million on the banking arm of Tesco, the British supermarket chain.

“At the core of Barclays is our U.K. bank,” Venkatakrishnan told The Wall Street Journal in Davos, Switzerland, last month. “Any strong global bank has to be really good in its domestic market, and that has to be the core of our ambition.”

“I think if you’re going to aim for higher returns and a better valuation, you need to have a more balanced bank,” he said.

Often known simply as Venkat, the cricket-loving banker splits his time between London and New York, and tries to be in the office by 6:30 a.m.

Venkatakrishnan had never run a bank before and spent much of his career managing risk, a position that by default emphasizes caution. Now, some analysts say, he will have to act boldly.

Potential courses of action—analysts, investors and industry veterans say—include shrinking the investment bank or even selling it. Other options include cutting costs throughout the bank and buying back larger amounts of shares. In theory, buybacks could help lift the share price and better position Barclays to acquire other businesses further down the line.

Any serious cuts to the investment bank would likely meet fierce resistance.

“It will require them to make some difficult decisions. It is down to him,” said Edward Firth, a banking analyst at Keefe, Bruyette & Woods.

“My sense is he’s a thoroughly nice man,” Firth said. “We all know people at Barclays’s investment bank. There are a lot of big heads and wide shoulders there, and to go up against them, you need a tough guy. And whether Venkat’s got that, I don’t know.”

Barclays’s struggles reflect a broader reordering of the global economy and financial system since the 2008-2009 financial crisis. Share prices for big U.S. banks such as JPMorgan Chase have surged, and America’s capital markets have grown considerably, aided by cheap cash and a technology-driven boom.

But banks in the U.K. and continental Europe have generally fared far worse, in part because of weaker economies and tougher regulators.

The shares of Barclays and numerous other European banks trade considerably below book value—or the value of their assets beyond what they owe. That suggests investors think the banks will struggle to generate a decent return for shareholders using the assets at their disposal.

Royal Bank of Scotland, once the world’s largest bank by assets, reinvented itself as the retail-focused NatWest Group. It is still partly owned by the U.K. government after RBS’s crisis-era bailout.

For its part, Barclays avoided a bailout and tried to remain a big, multiservice bank on both sides of the Atlantic. It even bulked up on Wall Street with a fire-sale purchase of the U.S. arm of Lehman Brothers.

Robert Diamond, a former Barclays CEO, said U.K. lenders are at a disadvantage against U.S. banks because of British “ringfencing” rules that stop cheap retail deposits from funding investment banking. Those rules make capital costlier and make it harder for banks to expand, he said.

Underscoring the challenge facing Venkatakrishnan is a previous failed reinvention under Antony Jenkins, the retail banker who succeeded Diamond. In 2015, Jenkins proposed to drastically shrink the investment bank’s assets. The board tentatively agreed to do so but reversed after pushback from the unit’s leaders, according to a person familiar with the matter.

The board, frustrated by the bank’s performance, later fired Jenkins. Former JPMorgan banker Staley came in, and instead tried to make Barclays into a compact version of the U.S. powerhouse.

Venkatakrishnan was hired by Staley in 2016 as chief risk officer, before becoming head of the arm that oversees global markets.

The investment bank at Barclays boomed early in the pandemic, driven by the global markets unit, which trades fixed-income securities, equities and derivatives. But profit has slumped of late, as both bond trading and dealmaking have slowed down.

Self-inflicted wounds, such as mistakenly selling billions of dollars of securities that weren’t properly registered in the U.S., and getting stuck with risky debt from Elon Musk’s Twitter takeover, have added to the problems.

The investment bank’s volatile earnings are dragging down the bank’s share price, said Benjamin Toms, an analyst at Royal Bank of Canada.

Meanwhile, Barclays has lost ground in its own backyard. The share of U.K. consumers identifying Barclays as their primary bank fell to 13% in 2023 from 16% in 2020, according to research from RFI Global. The equivalent market share for smaller businesses fell to 17% from 20%. Barclays remained the largest U.K. bank by number of customers in both fields.

Its other major line of business—credit cards—has been hit by a pandemic-related trend: Consumers, armed with cash, have paid down balances, reducing the interest income that Barclays receives.

Some market participants are more sanguine. The investment bank has slowly but steadily become more profitable, as measured by return on tangible equity, said Ambrose Faulks of London-based Artemis Investment Management, a large Barclays shareholder. The unit that executes market trades typically provides a steady stream of cash during economic downturns, cushioning the bank during tough times, he said.

“The investment bank actually is a better asset than people give it credit for,” Faulks said.

Write to Josh Mitchell at joshua.mitchell@wsj.com