Barclays PLC (LSE:BARC) has unveiled a corporate overhaul, £2 billion of cost cuts and a £10 billion capital return as it looks to enliven the company's sluggish operational and financial performance as part of a new three-year plan.
Chief executive CS Venkatakrishnan said the initiatives are aimed at "driving higher returns, and predictable, attractive shareholder distributions".
The Barclays boss said he wants to significantly increase annual revenue to £30 billion in 2026 from £25.4 billion last year and reduce its cost-to-income ratio from 63% to the "high 50s", which means finding cost savings of £1 billion this year and £2 billion by 2026.
These cost-cutting measures could result in 17,000 job losses, according to analysts.
At the same time, the bank announced a reorganisation that will see it split from three into five divisions, which will provide a more "granular disclosure of the performance".
Going forward, it plans to marry these changes to enhanced returns - £10 billion from 2024 to 2026. That said, it will keep the dividend flat at 2023 levels and increase the payment per share via stock repurchases.
Turning to the financials, Barclays' annual profits fell by £400m to £6.6bn in the 12 months ended December 31, while its fourth-quarter performance felt the £900 million impact of £1bn of 'structural cost actions' as the high street lender posted a profit of just £100 million. Group income for the year of £25.4 billion was up 2%.
Reflecting the current economic problems, the credit impairment charge rose £700 million in 2023 to £1.9 billion.
The bank cut its bonus pool 3% to £1.75 billion due to a challenging period for its investment bank, or “lower year-on-year financial outcomes in some business areas” as it put it.
City impressed
Shares in the lender surged over 9% higher on Tuesday.
Analysts at UBS and Jefferies said the 2026 targets were more ambitious than expected, with the £10 billion of capital returns in addition to the £1.8 billion announced distributions alongside results totaling 54% of today's market cap.
The 2026 total revenue guidance of £30 billion is "materially higher" than the consensus City forecast of £27.3 billion, Jefferies noted.
2026 targets are more ambitious than we expected, no 2024 slippage either
UBS noted that greater cost efficiency is to be targeted by "collapsing a chunk of the shared service unit, BX, into the operating divisions, a positive step".
The target of at least 12% return on tangible equity in 2026 would value Barclays at around 3.5x earnings and compares with an expected target of 11% in 2025, analysts at the Swiss bank the added.
"Better targets for FY26 and a FY24 statutory ROTE guide for >10% (cons. 8.9%) are partially driven, we think, by higher than consensus income expectations for this year (and for 2026). Key that the 2024 targets indicate no real negative operating leverage from the group reshaping."
Numis analysts agreed the new targets are ambitious, with the big question "whether the market believes the revenue target".