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Barclays' (BCS) Strategic Efforts Aid Amid Capital Markets Woes
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Barclays PLC (BCS - Free Report) remains well-positioned for growth on the back of restructuring efforts to boost operational efficiency. A strong balance sheet is likely to keep capital distributions sustainable. However, uncertain capital markets performance and rising credit impairment charges are headwinds.
Barclays’ overall expenses are likely to stay at manageable levels as the business restructuring initiatives provide support. The company plans to pursue further cost-saving actions to boost efficiency. The structural cost initiatives are expected to result in £1 billion of savings in 2024, driven by structural cost actions taken in 2023 and ongoing efficiency investments. Management anticipates total gross efficiency savings of £2 billion and cost-to-income ratio to be in the high 50s by 2026.
BCS has been striving to simplify operations and focus on its core businesses. The company announced modifications to its operating divisions as part of the overhaul effective first-quarter 2024. This April, the company announced the sale of its Italian mortgage portfolio, which is expected to be completed in the second quarter of 2024, while discussions regarding the sale of its German consumer finance business are in an advanced stage.
Furthermore, in February 2024, the company announced Tesco’s retail banking business acquisition. This move is expected to aid its existing business and solidify its position in the market. In 2023, it acquired Kensington Mortgage, which supported its mortgage business in the U.K. These initiatives are likely to enhance the company’s profitability over time.
Moreover, Barclays’ capital distributions are encouraging. The company has been regularly paying dividends. The company intends to return at least £10 billion of capital to shareholders between 2024 and 2026 via dividends and share repurchases, with an inclination toward buybacks. The company initiated a share buyback of up to £1 billion beginning first-quarter 2024. Management seeks to redistribute up to £3 billion of capital in 2024 as part of the plan. A strong balance sheet makes capital distribution sustainable, thereby enhancing shareholders’ value.
Barclays currently carries a Zacks Rank #3 (Hold). Over the past six months, shares of the company have jumped 55.9%, outperforming the industry’s growth of 12.4%.
Image Source: Zacks Investment Research
Nevertheless, Barclays’ core operating performance remains subpar. Net interest income (NII), and net fee, commission and other income have been experiencing a volatile trend over the last several quarters due to a tough operating backdrop. Though NII witnessed a marginal rise on a year-over-year basis in the first quarter of 2024, net fee, commission and other income declined. While structural changes are likely to aid NII to some extent, the capital market uncertainties might weigh on the company’s top-line expansion.
Rising credit impairment charges remain another major concern for BCS. The company witnessed a substantial rise in credit impairment charges in 2020 to £4.8 billion, though there was a credit impairment release of £653 million in 2021. The metric has been consistently rising since 2022. While the trend reversed marginally during the first quarter of 2024, credit impairment charges are likely to remain elevated in the near term, given the expected economic slowdown.
The Zacks Consensus Estimate for KBCSY’s current-year earnings has been revised 48.1% upward in the past 30 days. KBC Group’s shares have gained 20.8% over the past six months.
The Zacks Consensus Estimate for BMA’s current-year earnings has been revised 29.6% north in the past 30 days. Macro Bank’s shares have surged 128.1% over the past six months.
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Barclays' (BCS) Strategic Efforts Aid Amid Capital Markets Woes
Barclays PLC (BCS - Free Report) remains well-positioned for growth on the back of restructuring efforts to boost operational efficiency. A strong balance sheet is likely to keep capital distributions sustainable. However, uncertain capital markets performance and rising credit impairment charges are headwinds.
Barclays’ overall expenses are likely to stay at manageable levels as the business restructuring initiatives provide support. The company plans to pursue further cost-saving actions to boost efficiency. The structural cost initiatives are expected to result in £1 billion of savings in 2024, driven by structural cost actions taken in 2023 and ongoing efficiency investments. Management anticipates total gross efficiency savings of £2 billion and cost-to-income ratio to be in the high 50s by 2026.
BCS has been striving to simplify operations and focus on its core businesses. The company announced modifications to its operating divisions as part of the overhaul effective first-quarter 2024. This April, the company announced the sale of its Italian mortgage portfolio, which is expected to be completed in the second quarter of 2024, while discussions regarding the sale of its German consumer finance business are in an advanced stage.
Furthermore, in February 2024, the company announced Tesco’s retail banking business acquisition. This move is expected to aid its existing business and solidify its position in the market. In 2023, it acquired Kensington Mortgage, which supported its mortgage business in the U.K. These initiatives are likely to enhance the company’s profitability over time.
Moreover, Barclays’ capital distributions are encouraging. The company has been regularly paying dividends. The company intends to return at least £10 billion of capital to shareholders between 2024 and 2026 via dividends and share repurchases, with an inclination toward buybacks. The company initiated a share buyback of up to £1 billion beginning first-quarter 2024. Management seeks to redistribute up to £3 billion of capital in 2024 as part of the plan. A strong balance sheet makes capital distribution sustainable, thereby enhancing shareholders’ value.
Barclays currently carries a Zacks Rank #3 (Hold). Over the past six months, shares of the company have jumped 55.9%, outperforming the industry’s growth of 12.4%.
Image Source: Zacks Investment Research
Nevertheless, Barclays’ core operating performance remains subpar. Net interest income (NII), and net fee, commission and other income have been experiencing a volatile trend over the last several quarters due to a tough operating backdrop. Though NII witnessed a marginal rise on a year-over-year basis in the first quarter of 2024, net fee, commission and other income declined. While structural changes are likely to aid NII to some extent, the capital market uncertainties might weigh on the company’s top-line expansion.
Rising credit impairment charges remain another major concern for BCS. The company witnessed a substantial rise in credit impairment charges in 2020 to £4.8 billion, though there was a credit impairment release of £653 million in 2021. The metric has been consistently rising since 2022. While the trend reversed marginally during the first quarter of 2024, credit impairment charges are likely to remain elevated in the near term, given the expected economic slowdown.
Foreign Bank Stocks Worth Considering
Some better-ranked foreign banks worth a look are KBC Group NV (KBCSY - Free Report) and Banco Macro S.A. (BMA - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks Rank #1 stocks here.
The Zacks Consensus Estimate for KBCSY’s current-year earnings has been revised 48.1% upward in the past 30 days. KBC Group’s shares have gained 20.8% over the past six months.
The Zacks Consensus Estimate for BMA’s current-year earnings has been revised 29.6% north in the past 30 days. Macro Bank’s shares have surged 128.1% over the past six months.