Barclays plans to return £10bn to shareholders

London — Barclays laid out a three-year plan to revive its flagging share price on Tuesday, including axing £2bn of costs, returning £10bn to shareholders and investing in its high-returning UK bank.

The British bank’s shares rose by as much as 7% after the announcement, which also included a shake-up of its operating divisions, by Barclays CEO CS Venkatakrishnan, who is known internally as Venkat. The shares were up 5% in morning trade.

Venkatakrishnan’s plans, which he described as “measured ambition”, see Barclays prioritise its more profitable consumer and business lending operations, while reducing the proportion of assets accounted for by its more costly investment bank.

The bank’s first strategy update in almost a decade marks an inflection point for Venkat as he tries to improve returns after a period of management turmoil and underwhelming results.

His update included plans to cut £1bn in costs in the near term and to review the future of its payments business, both earlier reported by Reuters.

The cuts will be focused on Barclays’ UK consumer and transatlantic investment banks, with both seeing a £700m reduction.

Barclays will allocate an additional £30bn in risk-weighted assets to its UK retail bank by 2026. The unit was boosted this month by the £600m acquisition of supermarket Tesco’s banking arm.

Barclays said it still wanted to grow its investment bank over the three years, albeit more slowly than retail, while rebalancing it to grow market share in areas including equities and advisory.

That will reduce the assets accounted for by its investment bank from 63% in 2023 to 50% by 2026, Venkatakrishnan said.

"[There’s] no huge change in the shape of the bank but that was always fairly unlikely,” said Richard Marwood, portfolio manager at Royal London Asset Management.

The strategy update came as Barclays posted a 6% fall in annual profit to £6.6bn, in line with analyst forecasts, as a higher charge for potential bad loans weighed.

Analysts at JPMorgan said the update could imply upgrades to forecasts for the bank’s performance, but the plans relied on revenue growth and the focus would be on its execution.

Barclays cut 5,000 jobs in 2023, CFO Anna Cross told reporters, with many of these falling across back office roles.

Barclays also said it would review the future of its UK merchant acquiring business, which handles payments.

The bank said it would return a total of £3bn to shareholders for 2023 — up 37% on the previous year — including a fresh share buyback of £1bn and a 5.3 pence per share final dividend.

New structure

Investors in Barclays, which has one of the lowest valuations among European peers, have grown impatient with its wilting share price and some favour simplifying its investment bank, Reuters reported earlier this month.

The pitch from Barclays to its shareholders resembles that by Deutsche Bank, which on February 1 said it would cut 3,500 jobs, buy back shares and splash out dividends in a bid to convince investors its own turnaround was on track.

Germany’s biggest bank has focused on growing its retail bank over its investment bank since 2019.

Barclays said its corporate and investment bank income fell 4% to £12bn in 2023, as client activity fell in both the markets and investment banking advisory businesses.

It said it would reorganise its business into five new operating divisions to provide clearer disclosure on performance and management accountability.

The bank’s head of corporate and investment banking, Paul Compton, long seen by many inside the bank as a potential successor to Venkatakrishnan, will step back from his current role and become chair of the unit.

Barclays said it would target a return on tangible equity, a key measure of performance, greater than 10% in 2024, with targets rising to in excess of 12% in 2026.

Reuters