Barclays closed the year with a net loss, but the bank’s CEO promises a £10 billion return by 2026 thanks to a strategic overhaul.
London-based multinational bank Barclays posted a net loss of £111 million in 2023, much worse than expected. Nevertheless, BCS stocks jumped 6% on Tuesday as the bank’s CEO announced a major strategic overhaul for the medium-long term.
Barclays is one of the 5 largest banks in the United Kingdom and one of the largest in the world. In Q4, Barclays posted a 4% quarterly fall in revenues and a 6% fall in pre-tax profits year-on-year.
According to a Reuters poll, analysts were expecting a £60.95 million net profit for the last quarter of 2023. Instead, Barclays closed the annual account in red.
The issues for Barclays had two main sources: cost restructuring, resulting in measures for £900 million in the last quarter; and waning investment momentum. Barclays’ corporate and investment bank (CIB) is one of its main sources of income but is exposed to high market uncertainty.
The Bank of England brought interest rates to 5.25% last year, and inflation remains high at 4% in January 2024. The energy crisis continues to keep prices high, and the effects of Brexit hamper the UK’s internal growth.
The United Kingdom fell into a recession last quarter, with GDP contracting by 0.3% in the October-December period.
A new strategy
Despite the many challenges, Barclays’ CEO C.S. Venkatakrishnan wants to exploit the current situation to present a better long-term strategy.
“Our new three-year plan,” Venkat said in a statement, “is designed to further improve Barclays’ operational and financial performance, driving higher returns, and predictable, attractive shareholder distributions.”
The firm plans to reduce CIB costs by £2 billion by 2026. So far, similar strategies have not been effective, but Venkat promises new plans will be drawn up. “Our experts believe a 20% reduction in headcount is needed and would not impact day-to-day operations,” he said. He also noted, however, that a coherent strategy will be an uphill battle.
Moreover, the entire company will be completely restructured. Venkat announced the creation of five new divisions: Barclays UK, Barclays UK Corporate Bank, Barclays Private Bank and Wealth Management, Barclays Investment Bank, and Barclays US Consumer Bank.
This way, there will be a stronger focus on the UK (as well as regular banking operations in the US). It will also provide better organization of the firm’s many operations, enhancing the performance of every single one.
Venkat promised £10 billion to investors between 2024 and 2026 thanks to this restructuring. 2024 will be the weakest of the future years, as Barclays will mostly focus on operational restructuring and cost-cutting.
