Barclays launches £2bn cost-cutting drive after drop in profits – business live

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UK bank Barclays is planning a £2bn cost-cutting drive as it shakes up its operations, and reported a drop in profits for last year.

Pre-tax profits at Barclays fell to £6.6bn in 2023, the bank reports this morning, down from £7bn in 2022 – a slightly larger fall than expected.

Higher interest rates pushed up earnings at Barclays UK, where income rose 5% to £7.6bn thanks to growth in net interest income – the gap between income from loans and payments to savers.

But Barclays’ investment bankers had a tougher year. Income at the Corporate and Investment Bank (CIB) fell by 4% to £12.6bn, driven by lower client activity in both Global Markets and Investment Banking.

Barclays also spent £900m on “structural cost actions” in the final quarter of last year, its latest financial results show, taking the total bill for cost cutting in 2023 to £1.0bn.

And there are more cuts to come, as CEO C. S. Venkatakrishnan unveils Barclays’ first major strategy update in a decade.

Barclays says it is aiming for £1bn of gross efficiency savings in 2024 and total gross efficiency savings of £2bn by 2026.

These cuts are designed to lift Barclays return on tangible equity – a key measure of a bank’s performance.

C. S. Venkatakrishnan says the bank’s new three-year plan will improve performance, with the bank also announcing a new £1bn share buyback.

Venkatakrishnan explains:

“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 £3.0bn to shareholders, up c.37% on 2022, which includes a further share buyback of £1.0bn.

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”

This shake-up will see Barclays reorganised into five new divisions: Barclays UK; Barclays UK Corporate Bank; Barclays Private Bank and Wealth Management; Barclays Investment Bank; and Barclays US Consumer Bank.

More to follow….

Also coming up today

MPs will grill the Bank of England governor, Andrew Bailey, and members of the Monetary Policy Committee (MPC) about interest rates, the future path of inflation, and how households and businesses are coping with higher borrowing costs.

The BoE could feel some heat over Britain’s fall into recession last week too, with former chief economist Andy Haldane warning it risks making the UK’s recession worse unless it cuts interest rates soon.

Yesterday, Conservative MP Sir Jacob Rees-Mogg told parliament that the Bank was “no longer showing itself to be competent” and its independence must be questioned.

Britain’s agricultural industry is gathering in Birmingham today for the National Farmers Union conference

Rishi Sunak will be there, and is expected to announce a package of grant support – including £220m to help farmers access new equipment.

The head of the National Farmers’ Union, Minette Batters, has warned that UK food security risks becoming a “poor relation” to other national priorities.

The agenda

• 10am GMT: Eurozone construction output data for December

• 10.15am GMT: Treasury committee to quiz Bank of England governor and colleagues on inflation and interest rates

• 10.15am GMT: National Farmers Union annual conference begins

• 3pm GMT: Conference Board Leading Economic Index of US business cycle