New Barclays chairman says recovery not yet complete

* New Chairman McFarlane says bank must evolve its strategy

* Bank a 'recovery proposition' for investors

* McFarlane says dividend lower than bank would wish (Recasts, adds chairman's letter to shareholders)

By Steve Slater and Matt Scuffham

LONDON, April 23 (Reuters) - New Barclays Chairman John McFarlane said the British bank still faced formidable challenges and signalled his intention to accelerate its turnaround plan within an hour of taking charge.

McFarlane took the helm after the bank's annual shareholder meeting on Thursday and set out his priorities in a letter to shareholders. He has the job of overseeing the bank's efforts to stamp out wrongdoing and improve performance.

In the letter, McFarlane acknowledged the poor performance of Barclays (LSE: BARC.L - news) ' shares, which are trading at 0.7 times the value of the bank's assets, below other British banks.

"We need to ensure that Barclays is an attractive investment proposition going forward. Currently we are still trading below book value and with a dividend level less than we would wish. We therefore remain a recovery proposition for shareholders that we need to see through," McFarlane said.

McFarlane, who oversaw a radical turnaround of British insurer Aviva (Other OTC: AIVAF - news) , said he was "optimistic of the outcome" having "dealt with a number of similar situations in the past".

"It is appropriate that we continue to evolve the strategy to fit the times and retain clarity on the proposition we are trying to build," McFarlane said.

One priority decision will be whether to continue cutting Barclays' investment bank. Chief Executive Antony Jenkins is cutting 7,000 jobs from the business, about a quarter of the total, but has said he could go further after it delivered a return on equity of just 2.7 percent last year as tougher regulations ate into its profitability.

McFarlane, a Scot, was appointed in September and has been on the Barclays board since January.

He said the bank needed to press ahead with work to restructure its legal entities in Britain and the United States, wind down unwanted assets and achieve its targets for capital.

Jenkins told the meeting he expected the bank to make "significant" progress this year towards settling outstanding investigations into past misconduct. He was referring to issues including an investigation into alleged foreign exchange manipulation. (Editing by Sinead Cruise and Keith Weir)