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Barclays Q4 & FY 2023 Earnings

Barclays Q4 & FY 2023 Earnings

The Bank's Shares Jump 6% as They Reveal Revival Plan after Subdued Earnings

Barclays reported Q4 Earnings on 20th February. The UK-based bank reported a fourth-quarter loss of £111 million, after reporting a profit in the same period last year. For the full year of 2023, Barclays reported the net attributable profit totaled £4.27 billion, a decrease from £5.023 billion in 2022. (Source: Barclays)

The numbers were impacted by a £900 million restructuring charge, with Chief Executive CS Venkatakrishnan confirming plans to bolster investment in the group's "higher returning" consumer and corporate business sectors, while simultaneously downsizing the investment banking division.

Key Takeaways

  • Barclay's net interest income (NII) for FY23 stood at £12.7bn, up 20% year-on-year (YoY).
  • For FY23 The London-based bank reported RoTE of 10.6% and earnings per share (EPS) of 32.4 share.
  • The Common equity tier one (CET1) ratio that measures the strength of the bank for FY23 stood at 13.8% down from 14% the previous quarter, accompanied by a tangible net asset value (TNAV) per share of 331 pence up from 295pence same period last year.
  • Credit impairment charges amounted to £1.9 billion as compared to £1.2 billion in 2022, with a loan loss ratio (LLR) of 46 basis points Vs. 30 basis points in 2022.

(Source: Barclays)

Barclays incurred a £900 million impact in the fourth quarter due to structural cost-cutting initiatives, which are projected to yield approximately £500 million in gross cost savings this year. The anticipated payback period for these measures is less than two years.

The impact of £900 million was intended to kickstart an "efficiency" program aimed at ultimately saving the bank £2 billion by 2026. The largest cuts are expected to come from the investment bank and UK retail bank, with Barclays planning to extract £700 million from each division by 2026. (Source: Barclays)

This is likely to entail job cuts, although executives stressed that they did not have a "specific headcount target" for the number of cuts from its global workforce of 94,400 as part of the program. The company has already eliminated 5,000 roles since October 2023. (Source: Barclays)

The restructuring costs included spending £340 million on "rightsizing" its workforce and an additional £88 million towards closing more branches. (Source: Barclays)

Credit impairment charges rose to £1.8 billion, an increase from £1.2 billion the previous year, driven by elevated delinquencies on credit card accounts in the US. (Source: Barclays)

The net interest margin, representing the variance between loan and savings rates, increased to 3.13% from 2.86% for the full year 2023. This rise was attributed to higher interest rates and the accompanying structural hedge benefit, which offset mortgage margin pressure and a decline in deposits as savers sought better rates following years of low returns. (Source: Barclays)

Moreover, income at the corporate and investment bank declined by 4% to £12.6 billion, attributed to reduced client activity in both global markets and investment banking. (Source: Barclays)

On 20th February, the bank unveiled a significant operational overhaul, comprising substantial cost reductions, asset divestitures, and a restructuring of its business divisions. Additionally, Barclays pledged to return £10 billion to shareholders between 2024 and 2026 through dividends and share buybacks. The bank has announced plans to buy back an additional £1 billion worth of stock this year. (Source: Barclays)

Chief Executive CS Venkatakrishnan announced that Barclays would undergo reorganization into five new divisions: Barclays UK; Barclays UK Corporate Bank; Barclays Private Bank and Wealth Management; Barclays Investment Bank; and Barclays US Consumer Bank, thereby placing increased emphasis on the retail bank and introducing a wealth management arm. While investment banking remains one of the five divisions, it will receive a reduced allocation of capital, with the investment banking arm projected to receive 50% compared to the current 63% allocation in the future.

"In its report, the bank stated, 'This re-segmentation will provide an enhanced and more granular disclosure of the performance of each of these operating divisions, alongside more accountability from an operational and management standpoint.'" (Source: Barclays)

Furthermore, earlier this month, the company took steps to fortify its domestic retail banking sector by agreeing to acquire the majority of Tesco Bank's operations in a transaction valued at up to £1 billion. (Source: Barclays)

Barclays aims to achieve total gross cost savings of £2 billion and a Return on Tangible Equity (RoTE) of over 12% by 2026. (Source: Barclays)

The shares of Barclays surged by 6% on account of extensive strategic overhaul and shareholder payout plans. (Source: Guardian)


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