Barclays on Tuesday outlined plans to restructure its business with a view to cutting its costs by £2 billion over the next two years and boosting its returns to shareholders, with a view to paying out £10 billion in share buybacks and dividends between now and 2026.
In a bid to lift its sliding share price, the British bank’s plans will see it restructure itself into five new segments over the next three years – including a U.K. bank, a U.S. consumer bank, a U.K corporate bank, an investment bank, and a private banking and wealth management division.
Barclays’ CEO C.S. Venkatakrishnan, who is expected to announce further details of the plans to overhaul the bank during a four hour long presentation, said the overhaul is aimed at “driving higher returns, and predictable, attractive shareholder distributions.”
Shares in Barclays BARC, +4.68% listed on the London Stock Exchange increased 4% on Tuesday having fallen by 11% over the previous 12 months, following a series of underwhelming results due to a slowdown in its investment banking division.
The London lender’s cost cutting plans will see it aim to reduce its £17 billion annual costs by £2 billion, by reducing its headcount and cutting the size of its property portfolio, with a view to making £1 billion worth of savings in 2024 alone.
Barclays is also aiming to boost its total income to £30 billion a year by 2026, up from £25.37 billion in the full-year 2023. Analysts at Citi, led by Andrew Coombs, said they expect Barclays investment banking arm will drive this income growth – accounting for £2.7 billion of this £4.6 billion increase – with the remaining £1.9 billion from its retail and corporate businesses.
The bank’s plans followed an underwhelming set of results for the full-year 2023, during which Barclays fell short of analysts’ expectations in posting a 6% drop in its pre-tax profits to £6.56 billion ($ 8.26) billion, missing consensus estimates by 2%.
The London lender’s profits were dragged down by a 5% drop in revenue from its corporate and investment banking division, which generates more than half its total income, and a 12% uptick in its operating costs to £16.93 billion, including a £0.9 billion hit related to its restructuring.
The overhaul plans come as Barclays’ CEO Venkatakrishnan, who is known as Venkat inside the company, is facing mounting pressure to reverse the bank’s fortunes following a decline that has seen its share price drop 19% since he took control in November 2021.
“Overall, we think that management’s plans could imply double-digit upgrades to consensus forecasts at face value, but with the plans reliant on revenue growth (including IB), the focus is likely to be on the conviction and details behind the targets, along with confidence in execution,” JP Morgan Cazenove analysts led by Raul Sinha said.