Barclays pledges £10 billion to shareholders and the stock flies on the stock market

(Il Sole 24 Ore Radiocor Plus) - Barclays star of the day on the London Stock Exchange after announcing it will return "at least £10 billion of capital to shareholders between 2024 and 2026 between dividends and buy backs" as part of its new three-year plan. The British bank's share price gained 7 per cent. The goals of the new plan and in particular the generous shareholder remuneration, announced at Investor Day, overshadowed the bank's lower than expected annual results. The new strategic plan calls for a return on tangible equity (Rote) of more than 10 per cent in 2024 and more than 12 per cent by 2026, up from 9 per cent in 2023 (10.6 per cent excluding extraordinary factors, up from 11.6 per cent). The return of capital of 'at least £10bn' points preferentially to buy backs, said the bank, which plans to 'keep the total dividend stable at 2023 levels in absolute terms, with gradual increases in the dividend per share through the reduction of shares due to buy backs'.

The group also aims for a cost/income ratio of about 63% in 2024 and expects cost savings of about EUR 2 billion to 2026. In terms of capital ratios, Barclays plans to 'continue to operate with a Cet 1 ratio in the 13-14% range'. Asset sales and a reorganisation of business divisions were also announced. The new structure includes five hubs, namely Barclays Uk (UK retail bank), Barclays Uk Corporate Bank, Barclays Private Bank and Wealth Management Barclays Investment Bank and Barclays US Consumer Bank.

The plan, explained CEO C.S. Venkatakrishnan, 'aims to further improve Barclays' operational efficiency and financial performance in order to increase profitability and deliver a more predictable and attractive distribution to shareholders'. All this news overshadowed the 2023 pre-tax profit of £6.6bn, down from £7bn in 2022 and below expectations. Earnings per share also fell 15% to 4.3 billion. Revenues were up 2% to 25.4 billion. Loan write-downs rose to 1.9 billion from 1.2 billion, mainly reflecting defaults on US credit cards. Loan write-downs rose to 1.9 billion from 1.2 billion, mainly reflecting US credit card defaults.

Falling short of expectations were mainly the fourth quarter accounts, which were weighed down by 0.9 billion in restructuring costs. In the last three months of 2023, the British banking group generated a pre-tax profit of £110m, less than half of analysts' estimates of £240m and compared to £1.3bn in the same period of 2022. The dividend for the second half of the year amounted to 5.3 pence per share and was below the consensus of 5.8 pence per share.

Citi analysts particularly highlight the targets for improved return on tangible equity and revenue growth for 2026. The experts appreciate that the bank has provided clarity on future returns on capital and note that the reorganisation of the group into five divisions should help support the foundations of the new targets.