LONDON – Barclays saw its shares slide Tuesday after the bank revealed plans to split itself into two, simplify its operations and cut its dividend amid weaker earnings.
The bank said its fourth quarter adjusted pretax profit, which includes one-off items like provisions to pay for mis-selling policies in the U.K., fell by more than a half to 247 million pounds ($344 million) from the year before.
The London-based firm’s restructuring plan is part of new rules to separate riskier investment banking from retail banking. Such ring-fencing is meant to keep people’s savings secure in the event of another financial crash.
The bank said it would pay a lower dividend this year and next year, leading shares to fall 8 per cent to 158.10 pence.
The bank also announced plans to sell down its stake in its African operations over the next three years to a non-controlling position. Barclays Africa Group Ltd. is now 62 per cent owned by Barclays and has 12 million customers across 12 countries.
New CEO Jes Staley says Barclays PLC “is fundamentally on the right path, and is, at its core, a very good business.”
Staley was brought in after former CEO Antony Jenkins was pushed aside amid concerns about the performance of Barclays’ investment bank. Staley began his career as a commercial banker and advanced to head J.P. Morgan’s global investment bank.
Jenkins had championed a more ethical approach to his company’s operations after he took charge in wake of allegations Barclays was involved in the manipulation of a key global interest rate called the London interbank offered rate, or LIBOR. He sought to reduce the importance of investment banking.
“The new boss Jes Staley is clearly taking a big broom to Barclays’ operations in a bid to dramatically simplify the group,” said Laith Khalaf of Hargreaves Lansdown stockbrokers. “When the dust has cleared, the bank should have two high quality financial services divisions, and the potential to offer investors a decent dividend, but it’s going to take some elbow grease to get there.”
The bank also offered a warning about the uncertainty regarding operations in the event that Britain votes to leave the European Union on June 23. It argued the vote “raises the possibility of a disruptive an uncertain exit from the EU, with attendant consequences for investment and confidence.”
It described the period following a vote in favour of leaving as having “unpredictable implications on market conditions.”
“We think it is in the interests of our customers and clients for the UK to remain in the EU,” Chairman John McFarlane said.