LONDON – NOVEMBER 5, 2020: Heavy fog covers the Canary Wharf business district, including global financial institutions Citigroup, State Street, Barclays, HSBC Holdings plc and the 1 Canada Place commercial office tower.
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london – barclays bank The British bank announced a broad strategic overhaul after reporting a fourth-quarter net loss of 111 million pounds ($139.8 million) on Tuesday, sending its shares up more than 5% in early trading.
Analysts polled by Reuters expected shareholder net profit of 60.95 million pounds for the quarter, according to London Stock Exchange Group data, as Barclays embarks on a major restructuring plan to reverse falling profits.
Full-year attributable net profit was £4.27 billion, down from £5.023 billion in 2022 and below the consensus forecast of £4.59 billion.
The bank also announced an additional 1 billion pounds of share buybacks and will develop a new three-year plan aimed at further improving operational and financial performance, Chief Executive CS Venkatakrishnan said in a statement.
Barclays suffered a loss of 900 million pounds in the fourth quarter due to structural cost-cutting measures, and expects total cost savings of about 500 million pounds this year, with a payback period of less than two years.
Here are some other highlights:
- Group revenue in the fourth quarter was 5.6 billion pounds, down 3% from the same period last year.
- Credit impairment charges were £552 million, up from £498 million in the fourth quarter of 2022.
- The common equity tier 1 (CET1) capital ratio, which measures a bank’s financial strength, was 13.8%, down from 14% in the previous quarter.
- Excluding fourth-quarter restructuring costs, full-year return on tangible equity (RoTE) was 10.6%. RoTE in the fourth quarter was 5.1%, down from 8.9% in the fourth quarter of 2022.
- Total quarterly operating expenses were essentially unchanged from the same period last year at £4 billion.
Momentum at Barclays’ traditionally strong corporate and investment bank (CIB) – particularly its fixed income, currencies and commodities trading units – weakened in 2023 as market volatility slowed.
On Tuesday, the bank announced a massive operational overhaul that includes deep cost cuts, asset sales and business unit restructuring, while pledging to return 10 billion pounds to shareholders through dividends and share buybacks between 2024 and 2026.
The business will now be organized into five operating divisions, separating corporate and investment banking: Barclays UK, Barclays UK Corporate Banking, Barclays Private Banking and Wealth Management, Barclays Investment Banking and Barclays US Consumer Banking.
“This re-segmentation will result in enhanced and more granular disclosure of the performance of each operating segment and greater accountability from an operational and management perspective,” the bank said in the report.
Barclays aims to achieve total cost savings of £2 billion by 2026 and increase RoTE by more than 12%.
ambitious goals
Mariva Rivas, vice president of global financial institution ratings at DBRS Morningstar, told CNBC that Tuesday’s strategy update may not be a “game changer,” but shows continuity with the model that’s already in place, with some improvements.
“We believe the 2026 ROTE target is >12%, which is at the lower end of peer ROTE, although higher than 9% in 2023 (10.6%, excluding the impact of cost restructuring),” she said via email.
“By business line, the UK business’s ROTE target will be driven by strong but weaker 2023 ROTE, while US Cards and IB’s ROTE improve significantly. In the US Card business, the improvement in 2026 ROTE will be driven by higher operating efficiency and lower impairments, which also depends on whether its macroeconomic assumptions change.”
Barclays aims to reduce the investment bank’s risk-weighted assets from 58% to around 50% by 2023 and reduce its IB cost-to-income ratio to around 50% from 69% last year.
“These targets appear to us to be quite ambitious given that IB typically requires ongoing investment in IT and improvements are expected to be achieved with IB revenue growth of around £1.8 billion by 2026, considering revenue has been fairly flat since then , which seems quite optimistic for 2021, and the nature of IB revenue tends to be somewhat volatile,” Rivas added.
