Barclays: red barons circle - FT.com Baron Rothschild, the 18th century banker, is reputed to have said that the time to buy is when there's blood on the streets. So would the baron buy Barclays shares today? Despite Tuesday's bounce, the shares are still down 11 per cent since the bank was fined last week for its attempts to manipulate Libor. That leaves them trading on 0.4 times book value, a discount to rivals with similar combinations of retail and investment banking - BNP Paribas and Deutsche Bank trade on 0.5 times book value, while JPMorgan is on 0.8 times. The question for investors is whether Barclays can close this and other gaps. Its 2011 return on equity was 5.8 per cent, well below the 8 per cent from BNP Paribas and Deutsche Bank and the 11 per cent from JPMorgan. If Barclays is to justify a higher valuation, it will have to improve its returns. This year started well, thanks partly to lower provisions in its well regarded UK retail business. But the heavy lifting will have to come from the investment bank, which accounts for 60 per cent of Barclays" pre-tax profit. Over the long term, pension funds" appetite for fixed income should play to its strengths in debt capital markets, while a new chief executive might take an axe to costs in some parts of the division. So there is some hope on the revenues and margins front. But in today's regulatory environment there is little hope of being able to improve returns by increasing leverage, despite Barclays" strong core tier one capital ratio of 10.9 per cent. And beyond that, the group faces not so much headwinds as a full-scale hurricane generated by a combination of the UK parliamentary inquiry into banking, the Libor scandal and associated potential for litigation, PPI misselling claims, the impact of the eurozone crisis, and last but not least the group's own leadership vacuum. Much of this must be priced into the shares though. If Barclays can nudge its return on equity closer to that of its rivals, 0.4 times book value will look like a steal. Just don't expect a smooth ride.