Barclays launches Â£2bn cost-cutting drive after drop in profits â business live

Introduction: Barclays announces Â£2bn cost-cutting drive as profits drop

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UK bank Barclays is planning a Â£2bn cost-cutting drive as it shakes up its operations, and reported a drop in profits for last year.

Pre-tax profits at Barclays fell to Â£6.6bn in 2023, the bank reports this morning, down from Â£7bn in 2022 â a slightly larger fall than expected.

Higher interest rates pushed up earnings at Barclays UK, where income rose 5% to Â£7.6bn thanks to growth in net interest income â the gap between income from loans and payments to savers.

But Barclaysâ investment bankers had a tougher year. Income at the Corporate and Investment Bank (CIB) fell by 4% to Â£12.6bn, driven by lower client activity in both Global Markets and Investment Banking.

Barclays also spent Â£900m on âstructural cost actionsâ in the final quarter of last year, its latest financial results show, taking the total bill for cost cutting in 2023 to Â£1.0bn.

And there are more cuts to come, as CEO C. S. Venkatakrishnan unveils Barclaysâ first major strategy update in a decade.

Barclays says it is aiming for Â£1bn of gross efficiency savings in 2024 and total gross efficiency savings of Â£2bn by 2026.

These cuts are designed to lift Barclays return on tangible equity â a key measure of a bankâs performance.

C. S. Venkatakrishnan says the bankâs new three-year plan will improve performance, with the bank also announcing a new Â£1bn share buyback.

Venkatakrishnan explains:

âIn 2023 Barclays delivered solid performance against a mixed macroeconomic backdrop, meeting its financial targets.

Our strong 13.8% Common Equity Tier 1 (CET1) ratio enables us to deliver increased total capital distributions of Â£3.0bn to shareholders, up c.37% on 2022, which includes a further share buyback of Â£1.0bn.

Our new three-year plan, which we will be announcing at the Investor Update today, is designed to further improve Barclaysâ operational and financial performance, driving higher returns, and predictable, attractive shareholder distributionsâ

This shake-up will see Barclays reorganised into five new divisions: Barclays UK; Barclays UK Corporate Bank; Barclays Private Bank and Wealth Management; Barclays Investment Bank; and Barclays US Consumer Bank.

More to followâ¦.

Also coming up today

MPs will grill the Bank of England governor, Andrew Bailey, and members of the Monetary Policy Committee (MPC) about interest rates, the future path of inflation, and how households and businesses are coping with higher borrowing costs.

The BoE could feel some heat over Britainâs fall into recession last week too, with former chief economist Andy Haldane warning it risks making the UKâs recession worse unless it cuts interest rates soon.

Yesterday, Conservative MP Sir Jacob Rees-Mogg told parliament that the Bank was âno longer showing itself to be competentâ and its independence must be questioned.

Britainâs agricultural industry is gathering in Birmingham today for the National Farmers Union conference

Rishi Sunak will be there, and is expected to announce a package of grant support â including Â£220m to help farmers access new equipment.

The head of the National Farmersâ Union, Minette Batters, has warned that UK food security risks becoming a âpoor relationâ to other national priorities.

The agenda

10am GMT: Eurozone construction output data for December
10.15am GMT: Treasury committee to quiz Bank of England governor and colleagues on inflation and interest rates
10.15am GMT: National Farmers Union annual conference begins
3pm GMT: Conference Board Leading Economic Index of US business cycle

Key events

Kalyeena Makortoff

Barclays is briefing journalists now about its new strategic plans, and its results for last year.

It says it cut headcount by around 5,000 full-time equivalent roles in 2023.

Going forward, there is no headcount target, they add.

Barclays says the reorganising of its operations into five divisions will provide âan enhanced and more granular disclosure of the performance of each of these operating divisionsâ.

It will also mean âmore accountability from an operational and management standpointâ.

It has appointed leaders for these new divisions:

Vim Maru appointed CEO of Barclays UK;
Matt Hammerstein appointed CEO of Barclays UK Corporate Bank (heâll also be head of Public Policy and Corporate Responsibility)
Sasha Wiggins appointed CEO of Barclays Private Bank & Wealth Management; and
Denny Nealon will continue in his current role as CEO of Barclays US Consumer Bank and Barclays Bank Delaware.

That leaves the Investment Bank, which will have several co-leaders:

Adeel Khan appointed sole head of Global Markets;
Cathal Deasy and Taylor Wright will continue in their current roles as Co-Heads of Banking; and
Stephen Dainton appointed President of Barclays Bank PLC and Head of Investment Bank Management.

Despite the 6% drop in profits last year, Barclaysâ bonus pool only became slightly shallower.

Bonuses for 2023 fell 3% to Â£1.2bn, down from Â£1.24bn in 2022.

There was little change in deferred bonuses either, with the total dipping to Â£543m from Â£549m a year ago.

Barclays to return Â£10bn to shareholders by 2026

Barclays says it plans to return âat least Â£10bn of capitalâ to shareholders over the next three years, through todayâs plan to boost returns and cut costs.

The Bank says it will do this through dividends and share buybacks, with âa continued preference for buybacksâ.

The plan is to maintain its total dividend pot, but lift the payment per share by buying back (and then cancelling) shares.