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The Barclays share price soars as it targets £10bn reward for shareholders

View of Tower Bridge in Autumn
Image source: Getty Images

As I write, the Barclays (LSE: BARC) share price is up by over 5% following the release of the FTSE 100 bank’s full-year results on 20 February.

It’s no secret the stock has struggled in recent times. In the last 12 months, it has seen 10.9% shaved off its price.

But with plans announced for a £2bn cost-cutting mission as well as rewards for shareholders, could this be the turnaround?

Breaking it down

So, what has pushed the stock up in morning trading?

Well, what’s grabbed investors’ attention is the plans for a strategic overhaul that aims to streamline the business and make it more competitive. To achieve this, Barclays will be split up into five divisions, which will separate the corporate and investment bank. By doing so, it hopes that each division will become more accountable.

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The release also highlighted the firm’s major push to cut costs. In 2024, Barclays is pursuing a cost-to-income ratio of 63%, down from 67% in 2023. By 2026, it’s aiming for the figure to be in the “high 50s in percentage terms”. Alongside this, it’s targeting £1bn of gross efficiency savings in 2024, with this rising to £2bn by 2026.

CEO CS Venkatakrishnan stated the three-year plan is “designed to further improve Barclays’ operational and financial performance, driving higher returns, and predictable, attractive shareholders distributions”.

Not all good news

That sounds like positive news. The market clearly liked what they saw. Yet despite that, pre-tax profits still fell by 12% to £6.6bn for 2023. In the fourth quarter, profits dipped 92% to £110m from £1.3bn the previous year. That’s a massive drop. However, after cutting 5,000 jobs in 2023, the firm spent £927m on restructuring costs, which it expects to result in savings of £500m this year.

There’s also the issue of interest rates. Its impairment charge for the year totalled £1.9bn, a £700m jump from 2022. That said, Barclays’ net interest income was up 20% from last year. In the UK it rose 5%.

Rewarding shareholders

What excites me the most, however, is the plans Barclays has in the years to come to give back value to shareholders. As an investor who targets income, news of £10bn being returned to shareholders via dividends and share buybacks over the next three years is something that I’m pleased to see.

With its share price flagging in recent times, its dividend has been a silver lining. It currently yields 4.9%, comfortably above the FTSE 100 average. Last year the business returned £3bn via dividends, which is a 37% bump from 2022.

Time to make a move?

It’s been a laggard for years. But is it now time to make a move on Barclays and snap up some shares? Well, I already own the stock. And right now, I’m happy with the exposure I have.

However, I see this update as a sign of the ambitious plans Barclays has for the times ahead. And if I didn’t own it already, I think now could be a smart time to open a position.

At 156p, I think Barclays stock looks cheap. If it’s able to deliver on its promises, I see it being a smart long-term investment to consider buying today.

The post The Barclays share price soars as it targets £10bn reward for shareholders appeared first on The Motley Fool UK.

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Charlie Keough has positions in Barclays Plc. The Motley Fool UK has recommended Barclays Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2024