Barclays PLC (BARC) is a global financial services provider offering personal and business banking, wholesale and commercial banking, and private and investment banking solutions to individuals, SMEs, corporates, and high-net-worth clients. It offers deposits and accounts, cards, loans, and investment solutions. The bank also offers services such as foreign exchange, transactional lending, mobile banking, premier banking, international banking, and online banking. Barclays caters to retail customers, small to medium-sized enterprises, and large corporates. The bank operates across the Americas, Asia, the Middle East, Europe, and Africa.

The company is in preparation to cut bonuses of Investment bankers on the back of pressure created by an activist investor Edward Bramson, whose investment vehicle Sherborne Investors owns approximately 5.5% of Barclays holdings, to improve the shareholder returns by contracting Barclays’ investment unit. He is the bank’s third-largest shareholder.

To increase the shareholder returns further, the bank will cut the number of promotions in the current year. The number of bankers promoted was 85 and 74 in the year 2018 and 2017 respectively. The bank is planning to cut bonuses to improve the performance of its investment division, and as per the projection by the market, the bonuses for the first quarter of FY19 of the BARC’s investment-bank division may decline by double digit as compared to the previous year.

The rate at which bankers gets their annual bonuses is more closely related to the performance of the employees. Barclays has a policy since 2016 to give bonuses according to the performance. However, Tim Throsby, who was the former head of the investment bank, did not cut the investment bankers’ bonuses even due to fall in the revenue. He was ousted last month as he could not achieve the bank’s profitability targets, which according to him were unachievable. As a result of the pressure created by an activist investor Edward Bramson, BARC has changed its direction for its investment bank after the bank expanded in 2018, in which the unit hired a lot of seniors and even made a huge investment in new technology.

Barclays Plc had reported profit before tax of £3,494 million in FY2018 as compared to £3,541 million in 2017 including £2.2 billion of litigation and conduct expenses in FY2018. During FY2018, Barclays International division had posted the profit before tax of £3.8 billion, which had increased from £3.3 billion in FY 17.

Barclays Stock Price Performance

Daily Chart as at April-24-19, before the market close (Source: Thomson Reuters)

On 24th April 2019, at the time of writing (before the market close, GMT 3:34 PM), Barclays PLC shares were trading at GBX 164.28, down by 1.38 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 217.65/GBX 144.99. The outstanding market capitalisation was around £28.68 billion with a dividend yield of 3.90 per cent.

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Meanwhile, the bank is facing low economic growth, trade wars and Brexit and will also be affected as central banks are threatening to reduce income from lending due to fall in interest rates. Therefore, Barclays can grow through its corporate and deal-making departments. In addition, the bank needs to take cost-cutting measures to grow, and there are possibilities that the bank will cut costs in the tune of £13.6 billion-£13.9 billion in order to increase its return on equity.

 

   
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