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Barclays shakes up strategy: Profit plunge sparks major makeover!


Barclays shakes up strategy

Barclays, a prominent financial institution, disclosed a 6% decline in its annual profit on Tuesday, a figure that corresponds with market expectations. This revelation comes as Chief Executive Officer C.S. Venkatakrishnan, known colloquially as Venkat within the organization, outlined a comprehensive array of strategic initiatives aimed at revitalizing performance and propelling the company's shares to greater heights.


These ambitious plans encompass a significant allocation towards buybacks, an extensive overhaul of operational frameworks, rigorous cost-cutting measures, and strategic asset divestments.


Venkatakrishnan unveiled these multifaceted strategies alongside the release of Barclays' full-year financial results for the fiscal year 2023. This strategic pivot, marking the bank's first comprehensive overhaul in nearly a decade, represents a pivotal juncture for Venkat's leadership tenure as he endeavors to steer the institution towards a trajectory of enhanced returns.



Such initiatives are deemed necessary following a period characterized by management turbulence, self-inflicted setbacks, and tepid financial performance.


Barclays, grappling with a subdued share price and bearing one of the lowest valuations among its European counterparts, finds itself under mounting pressure from stakeholders dissatisfied with its financial standing.


In response to these concerns, some investors advocate for a risk mitigation strategy, urging Barclays to streamline its investment banking arm, a sentiment echoed in a recent Reuters report.


The financial figures reported by Barclays for the fiscal year in question reveal a pretax profit of 6.6 billion pounds, a decrease from the previous fiscal year's figure of 7 billion pounds. Notably, this aligns closely with analysts' projections, which averaged 6.7 billion pounds, as compiled by the bank.



In a bid to reward shareholders and instill confidence in the company's financial health, Barclays announced plans to allocate a total of 3 billion pounds towards shareholder returns for the fiscal year 2023.


This represents a substantial increase of 37% compared to the previous fiscal year. The proposed distribution includes a fresh share buyback program amounting to 1 billion pounds, alongside a final dividend payout of 5.3 pence per share.


As part of its strategic realignment efforts, Barclays has outlined intentions to restructure its business operations into five distinct operating divisions.


This strategic resegmentation, as described by the bank, is envisioned to offer enhanced transparency regarding the performance metrics of each division while fostering greater accountability from both operational and managerial standpoints.


Looking ahead, Barclays has set ambitious performance targets, aiming for a return on tangible equity in excess of 10% by the year 2024, with aspirations for this metric to surge beyond 12% by 2026.



However, despite successfully thwarting a three-year campaign led by activist investor Edward Bramson aimed at downsizing its investment banking arm, Barclays continues to face scrutiny over the performance of this unit.


Despite its significant contribution to the bank's revenue stream, the investment banking division is subject to fluctuations in returns and is noted for consuming a sizable portion of the group's capital.


Barclays reported a 4% decline in income generated from its corporate and investment banking division, amounting to 12 billion pounds for the fiscal year 2023 as we read in Reuters.


This downturn is attributed to subdued client activity witnessed across both the markets and investment banking advisory segments, reflecting broader economic dynamics and market conditions.


20.02.2024



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