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Barclays' (BCS) Restructuring Efforts Aid Amid Uncertainties

Barclays PLC’s BCS business restructuring and cost-mitigating efforts are likely to aid growth and boost operating efficiency. The company’s recent inorganic expansion initiatives are expected to further boost its profitability. However, uncertainties in the capital markets are likely to impede revenue growth to some extent.

BCS’ initiatives to enhance operating efficiency over the last few years have been coming to fruition, which is demonstrated by the reduction in expenses. Though total operating expenses witnessed a rise in 2022 and 2023, the metric saw a decline at a compound annual growth rate (CAGR) of 2.4% over the six-period ended 2021.

Business restructuring efforts are likely to bolster cost management, keeping overall costs under control. Barclays plans to pursue further cost-minimizing efforts to improve efficiency. The structural cost initiatives are expected to reduce the cost by £500 million in 2024. Total gross efficiency savings of £2 billion are expected by 2026.

Barclays has been simplifying operations and focusing on core businesses over the past few years. It announced changes to its operating divisions, effective from the first quarter of 2024, as part of its business revamp.

Additionally, in February 2024, the company announced the sale of credit card receivables worth $1.1 billion to Blackstone’s Credit & Insurance segment. This move aimed to optimize risk-weighted assets and enhance lending capacity for Barclays Bank Delaware in the United States. In the same month, BCS announced the deal to acquire Tesco’s retail banking business, which will complement its existing operations and strengthen its position in the market. These initiatives are likely to drive its profitability higher over time.

BCS currently carries a Zacks Rank #3 (Hold). Over the past six months, shares of the company have rallied 29.5% on the NYSE, outperforming the industry’s growth of 17.3%.

Zacks Investment Research
Zacks Investment Research

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Amid the restructuring efforts, Barclays’ core operating performance remains a matter of concern. Net interest income (NII) and net fee, commission, and other income have been experiencing volatility over the last several quarters due to a challenging operating backdrop.

The uncertainty concerning the capital markets performance is likely to weigh on the company’s financials, keeping its growth prospects subdued.

This is further evident in the Zacks Earnings Estimate for 2024 being revised 1.9% lower over the past seven days, given the dampened growth prospects. It indicates conservativism amongst analysts regarding the company’s future performance amid economic uncertainties.

Stocks to Consider

Some better-ranked foreign bank stocks worth mentioning are Banco Macro S.A. BMA and Bancolombia S.A. CIB.

Banco Macro’s earnings estimates for the current year have been revised upward by 32.3% in the past 30 days. The company’s shares have jumped 177.7% over the past six months. At present, BMA sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Bancolombia’s 2024 earnings estimates have moved 1.4% north in the past 60 days. The stock has gained 45% over the past six months. Currently, CIB carries a Zacks Rank #2 (Buy).


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