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Investment Overview
Barclays has seen a decrease in operating expenses over the past six years, with a negative compound annual growth rate of 2.4%. The company plans to continue cost-saving actions, resulting in gross savings of 1 billion in 2024. By 2026, Barclays aims for total efficiency savings of 2 billion and a cost-to-income ratio in the high 50s. The company has also divested its consumer finance business, acquired Tesco's retail banking business, and sold $1.1 billion in credit card receivables to Blackstone's Credit & Insurance segment.
Bull Case
Barclays' initiatives to improve efficiency over the last few years have been bearing fruit, as evident from a fall in expenses. While total operating expenses increased in 2022 and 2023, the same declined in 2024 alongside a negative compound annual growth rate (CAGR) of 2.4% over the six-year period ended 2021. Overall expenses are expected to remain manageable as business restructuring initiatives continue to provide support. The company intends to undertake further cost-saving actions to improve efficiency. The structural cost actions resulted in gross savings of 1 billion in 2024. The company aims to achieve gross efficiency savings of 0.5 billion in 2025. By 2026-end, management expects total gross efficiency savings of 2 billion and the cost-to-income ratio to be in the high 50s. Barclays has been striving to simplify operations and focus on core businesses. In February 2025, it divested its Germany-based consumer finance business. In November 2024, the company acquired Tesco's retail banking business. The move is expected to complement its existing business and strengthen its position in the market. Further, as part of its business overhaul, the company announced changes to its operating divisions effective first-quarter 2024. In April 2024, it announced the disposal of its Italian mortgage portfolio (completed in the second quarter of 2024). The company has sold $1.1 billion in credit card receivables to Blackstone's Credit & Insurance segment to bolster the lending capacity for Barclays Bank Delaware in the United States. In 2023, Barclays acquired Kensington Mortgage, which bolstered its mortgage business in the United Kingdom. Driven by these initiatives, the company's profitability is expected to improve over time.
Barclays has been rewarding shareholders with enhanced capital distributions. The company has been paying dividends regularly and plans to keep the total dividend payout stable at the 2023 level, with progressive dividend growth. Barclays plans to return at least 10 billion of capital to shareholders between 2024 and 2026 through dividends and share buybacks, with a continued preference for buybacks. Driven by a solid balance sheet position, the company's sustainable capital distributions will likely enhance shareholder value. Shares of Barclays have outperformed the industry over the past year. The Zacks Consensus Estimate for 2025 has been revised 5% upward over the past week. Moreover, its current price-to-book and price-to-earnings (F1) ratios are lower than the industry averages. Also, it has a Value Score of B. Thus, given the strong fundamentals and positive estimate revisions, the company's impressive price performance is likely to continue in the near term.