Barclays stock gained nearly 5% on Tuesday morning as the bank unveiled to investors its cost-cutting and buyback plans.
ADVERTISEMENTShares in Barclays climbed 4.77% on the London Stock Exchange in early trade after the bank reported its latest financial results – and announced an extensive structural overhaul.
Total group income rose by 2% to £25.4 billion (€29.6 billion), although the fourth quarter contribution of £5.6 billion (€6.5 billion) was shy of the expected £5.8 billion (€6.7 billion).
Net interest income (NII), meanwhile, jumped by 20% to £12.7 billion (€14.8 billion) year-over-year, with higher interest rates continuing to provide a tailwind.
Pre-tax profit for 2023 came in at £6.6 billion (€7.7 billion), down from £7 billion (€8.1 billion) in 2022.
The group pledged to hand £10 billion (€11.67 billion) back to shareholders by 2026 and also announced operational changes and substantial cost cuts to boost profits.
Chief executive CS Venkatakrishnan said the bank’s new three-year plan will improve performance.
“Our new three-year plan…. is designed to further improve Barclays’ operational and financial performance, driving higher returns, and predictable, attractive shareholder distributions,” he said in a statement.
“There is a common theme among companies: increase dividends and cut costs to keep shareholders happy. Staff might not appreciate this strategy as it means they may have to do additional work for the same pay, but running a leaner machine is the playbook for corporates when there is an uncertain economic outlook,” Russ Mould, investment director at AJ Bell, commented.
Mould also highlighted that Barclays is the latest to follow this path as it announced another business reorganisation, a lower cost-to-income ratio target and a goal to return £10 billion to shareholders via share buybacks and dividends over the next three years.
“The news has gone down well with the market and has helped Barclays’ share price burst back to life after a long period in the doldrums. But will it be enough to protect CS Venkatakrishnan’s job? Having a plan is one thing, executing on it is another and so far, the jury is still out on whether he’s capable of turning Barclays around,” Mould added.
Richard Hunter, head of markets at Interactive Investor, also commented on the results and market reaction.
“The initial share price reaction is one of eager anticipation over the bank’s new and ambitious plans, despite a mixed performance over the last year. The price hike also undoes some of the damage wrought of late, where prior to these results the shares had dropped by 14% over the last year, as compared to a dip of 3.6% for the wider FTSE 100.
“It remains to be seen whether this fresh wave of optimism will be fulfilled, but in the meantime Barclays is a group with deep pockets and a diversified business model which is enough to tip the scales, leading to a market consensus which comes in at a cautious buy,” he said.