Barclays aims to cut costs by £2 billion in bid to boost returns

BARCLAYS said it will go on a major cost-cutting drive as part of chief executive officer CS Venkatakrishnan’s efforts to boost returns above 12 per cent in the coming years, ending months of speculation about the future direction of one of Europe’s largest investment banks.

The British bank, which is mainly known for its global investment banking and markets franchise, achieved a return on tangible equity of 9 per cent for 2023, according to a statement on Tuesday (Feb 20). To achieve its new targets, Barclays said it will reduce costs by £2 billion (S$3.4 billion) by 2026.

Barclays said it plans to return £10 billion of capital to shareholders over that time. The company is also reorganizing into five new operating divisions: its UK retail bank, its UK corporate bank, a private bank and wealth management arm, an investment banking division and a US consumer bank.

“Our new three-year plan, which we will be announcing at the investor update today, is designed to further improve Barclays’ operational and financial performance, driving higher returns, and predictable, attractive shareholder distributions” Venkatakrishnan said in the statement.

Barclays has rejiggered some of its top management ranks as a result of the changes. Adeel Khan has been appointed sole head of global markets, while his former co-head Stephen Dainton becomes president of Barclays Bank and head of investment bank management.

Vim Maru is the new CEO of Barclays UK and the previous holder, Matt Hammerstein, is now CEO of the UK corporate bank. Hammerstein also takes on responsibility for public policy and corporate responsibility from Sasha Wiggins, who is now CEO of the private bank and wealth management.

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Venkatakrishnan has been reviewing the bank’s strategy in recent months and has been seeking to reassure investors about his plans for the bank. Still, the company’s share price has continued to lag rivals as returns languished in recent quarters.

The firm’s corporate and investment bank posted total revenue that slipped 7 per cent in the fourth quarter. The unit has long been a source of debate for investors because of the amount of capital it consumers relative to other, higher-returning parts of Barclays’s business.

The company has said it will seek to grow other parts of the business in order to improve that balance and in recent weeks announced it would acquire much of Tesco’s banking business as the lender seeks to establish a greater foothold in retail banking in the UK.

Barclays UK, the unit that includes the firm’s retail offerings, saw revenue slump 9 per cent. Barclays is planning to offer investors a bigger update on its plans for boosting returns at an event later on Tuesday. BLOOMBERG