Barclays is to cut £2bn in costs, raising fears of further job losses as the lender shrinks its investment bank in a corporate shake-up intended to increase shareholder payouts by £10bn within three years.
Barclays released figures on Tuesday showing that pre-tax profits for 2023 fell to £6.6bn, down 6% from £7bn a year earlier and slightly lower than analyst forecasts for £6.7bn.
The figures were knocked by a £900m charge as the chief executive, CS Venkatakrishnan, revealed restructuring plans that would involve growing its “higher returning” consumer and corporate business while slashing costs and the size of the investment banking division, in Barclays’ first strategy update in a decade.
The charge was meant to jump start an “efficiency” programme that will ultimately save the bank £2bn by 2026. The biggest cuts will come from the investment bank and UK retail bank, with Barclays planning to strip out £700m from each division by 2026.
That is likely to involve job cuts. But bosses insisted said theydid not have a “specific headcount target” for how many of its 94,400 global staff would be lose their jobs as part of that programme. The company may have front-loaded its job cuts, having slashed 5,000 roles between October and December last year.
Those job cuts have cost the bank, though, with Barclays having spent £340m “rightsizing” its workforce, and another £88m towards closing and reviewing the future of more of its branches.
But bosses stressed that, despite the costs cuts, it intends to invest in the UK. Venkatakrishnan told investors that his vision was for “a Barclays which seeks to deepen and broaden its role in the UK, as it engages with the world from London”.
“We are very bullish on the UK as a place in which to do business and from which to do business,” he said, adding that he expects a rebound in listings and deal-making in London that have dried up in recent years, driving companies to US stock markets.
“We are working with the government, with the regulatory agencies, and with companies to get that equity culture back in the UK to what it used to be, and to see IPOs especially …[from] technology companies, and life sciences companies,” Venkatakrishnan said. However, he admitted that “it will take some time”.
Barclays bosses said it would mean the bank was able to rely on “more stable income streams” from its retail and corporate lending divisions, which account for about 35% of its income but should grow to 70% by 2026. That is meant to help increase total income to about £30bn, from about £25.4bn now, by 2026.
Investors reacted positively to the strategy update and shareholder payout plans, sending shares up 6%.
The bank’s annual profits were also hit by a higher impairment charge of £1.9m, indicating that more of its borrowers are believed to be at risk of falling behind on loan payments compared with 2022, when it set aside £1.2bn for potential defaults. However, most of that charge was linked to its US credit card business rather than the UK division.
The overall drop in profits affected Barclays’ staff bonus pool, with top performers poised to share a marginally smaller bonus pool of £1.2m, down 3% from a year earlier. Including deferred bonuses, bankers will share £1.8bn between themselves.
The bonus cuts knocked 26% off the cash bonus for Venkatakrishnan, which fell to £1.4m from £1.9m a year earlier. It meant his overall pay packet dropped 10% to £4.6m.
Barclays made multimillion-pound payouts to its highest-earning bankers, with 668 receiving more than €1m (£856,000) in 2023.
Twenty-eight were paid more than €5m each, while one unidentified banker took home more than €11m, more than double the chief executive’s pay packet, according to documents released alongside the Barclays annual report.
