Interactive Investor

ii view: Barclays targets higher shareholder returns

Staff headcount has fallen by a third over the last 10 years, and the lender continues the simplification of its business. Buy, sell, or hold?

8th March 2024 15:45

Keith Bowman from interactive investor

Full-year results to 31 December

  • Income up 2% to £25.4 billion
  • Pre-tax profit down 6% to £6.6 billion
  • Capital cushion or CET1 ratio of 13.8%, unchanged from H1
  • Final dividend of 5.3p per share
  • Total 2023 dividend up 10% to 8p per share
  • Statutory Return on Tangible Equity (RoTE) of 9%

Guidance:

  • Targeting a RoTE of over 10% in 2024
  • Targeting a RoTE of over 12% in 2026

Chief executive Mr Venkatakrishnan said:

"In 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 £3 billion to shareholders, up c.37% on 2022, which includes a further share buyback of £1 billion. 

“Our new three-year plan is designed to further improve Barclays' operational and financial performance, driving higher returns, and predictable, attractive shareholder distributions"

ii round-up:

Barclays (LSE:BARC) operates across the two broad divisions of the UK and International. 

It conducts business in the three arenas of personal and corporate banking, credit card lending, and global investment banking. 

For a round-up of these latest results announced on 20 February, please click here.

ii view:

Over the last decade, Barclays has remained a bank undertaking change. A broad focus on the UK and US follows exits including those from European retail banking and Africa. Countries of operation have reduced from over 50 in 2014 to 38 today. Competing against rivals including Lloyds Banking Group (LSE:LLOY) and NatWest Group (LSE:NWG) in the UK, its strengths now include over 20 million UK banking customers, over 20 million US credit card customers and a leading investment banking position outside of the USA. 

Group strategy aims to create a simpler organisation, improve both customer service and investor returns and move towards a more balanced capital allocation by business and geography, enabling greater financing to its customers and businesses.

For investors, a challenging economic backdrop has seen revenue at its investment banking operations decline as customers potentially await clarity before proceeding with mergers and acquisitions. Bad debt provisions have been added to, while rival investment banks such as those owned by JPMorgan Chase & Co (NYSE:JPM) and The Goldman Sachs Group Inc (NYSE:GS) are not standing still. 

On the upside, new performance improvement targets are now being pursued, with total shareholder returns potentially rising to at least £10 billion between 2024 and 2026, up from £7.7 billion between 2021 and 2023. Its diverse business model regularly sees challenges at one division countered by gains elsewhere. A capital cushion of 13.8% remains at the upper end of management’s 13% to 14% target range, while the forecast dividend yield sits in the 5% region. 

For now, and despite ongoing risks, this diverse banking group looks to remain worthy of consideration for a position in diversified investor portfolios.   

Positives

  • Business diversification
  • Attractive dividend yield (not guaranteed)

Negatives

  • Uncertain economic outlook
  • Previous litigation and conduct issues

The average rating of stock market analysts:

Cautious buy

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