Dive Brief:
- London-based Barclays pledged Tuesday to return £10 billion ($12.6 billion) to its shareholders over the next two years through buybacks and dividends.
- The announcement came as the bank pushed a three-year plan aimed at improving performance while slashing £2 billion in costs.
- The bank also reported a fourth-quarter net loss of £111 million Tuesday.
Dive Insight:
Key to the bank’s strategy is a reorganization that will split Barclays into five operating divisions: its U.K. retail business, U.K. corporate bank, investment bank, U.S. consumer bank, and its private bank and wealth management.
“This resegmentation will provide an enhanced and more granular disclosure of the performance of each of these operating divisions, alongside more accountability from an operational and management standpoint,” the company said Tuesday.
The changes come as Barclays posted a 6% drop in annual profit to £6.6 billion, in part due to higher charges for potential bad loans weighing on earnings.
The bank took £1.9 billion in credit impairment charges in 2023, compared with £1.2 billion a year earlier.
“Our new three-year plan … is designed to further improve Barclays' operational and financial performance, driving higher returns, and predictable, attractive shareholder distributions,” CEO C.S. Venkatakrishnan said in the bank’s Tuesday release.
The plan comes little more than a month after the bank disclosed it had cut roughly 5,000 jobs last year.
Barclays joins Citi among Wall Street banks undergoing a strategic reorganization. Citi, too laid out a five-silo structure in its September refresh.
The structural changes to Barclays show optimism about what deal-flow activity is going to look like over the course of 2024, Seana Smith of Yahoo Finance said.
“But I think the question that so many analysts, so many shareholders and investors are asking right now is how quickly some of that activity is going to return,” she said.
Venkatakrishnan said the bank’s 13.8% common equity ratio enabled it to deliver increased total capital distributions of £3 billion to shareholders last year, up 37% compared to 2022.
Barclays is also targeting a return on common equity of greater than 10% this year and greater than 12% by 2026.
Mariva Rivas, vice president of global financial institution ratings at DBRS Morningstar, told CNBC she would not categorize Barclays’ new strategy as a “game changer,” but said that the plan shows refinement of the model the bank already had in place.
“We consider the 2026 ROTE target of > 12% to be at the lower end of peers’ ROTE, although higher than the 9% in 2023 (10.6% excluding the cost restructuring impact)” she told CNBC in an email.
