2/20/2024

Barclays implements company restructuring

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Key points:

  • Barclays has unveiled its turnaround plan and announced plans to cut costs by £2 billion.
  • The reason for this decision was a drop in annual profits by 6% to 6.6 billion pounds.
  • The company plans to introduce 5 new operating divisions and clearer performance disclosure.

On Tuesday, Barclays Bank unveiled a three-year strategy aimed at revitalizing its declining stock value. The plan includes a cost-cutting initiative of £2 billion, distributing £10 billion ($12.6 billion) to shareholders, and making strategic investments in its lucrative UK retail banking sector.

Benefits of restructuring

Following the announcement of a comprehensive strategy update by Barclays’ CEO, the bank’s shares experienced a surge of up to 7%. This strategic shift, the first in almost ten years, signals a pivotal moment for the company as it seeks to enhance profits following a period of managerial upheaval and unsatisfactory financial results.

The outlined strategy entails a cost-cutting initiative of £1 billion in the immediate future. However, specific details regarding the methods Barclays will employ to achieve these cost reductions and the planned moderation of risk in its investment banking division have not been disclosed.

How the decision to change strategy was made

Barclays unveiled its strategic update against the backdrop of a reported 6% decline in full-year profits to £6.6 billion, aligning with analysts’ predictions. This dip was attributed to elevated fees related to potentially problematic loans. According to JPMorgan analysts, the strategic overhaul has the potential to prompt an upward adjustment in the bank’s performance projections, although success hinges on revenue growth, with particular emphasis on effective execution.

Notably, Barclays had already implemented workforce reductions, eliminating 5,000 jobs in the preceding year, with a primary focus on back-office positions. As part of its restructuring efforts, the bank intends to realign its business into five new operating divisions. This restructuring aims to offer enhanced transparency regarding performance metrics and delineate managerial responsibilities.

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