Barclays Investors Braced for Dividend Cut

Shares price plummets after Barclays announces plans to restructure bank and halve dividend after profits fall

Emma Simon 1 March, 2016 | 2:17PM
Facebook Twitter LinkedIn

Shares in Barclays Bank (BARC) fell sharply today after the bank reported a 2% drop in underlying annual profits – to £5.4 billion.

The bank will pay a final dividend for 2015 – bringing the full dividend for the year to 6.5p – the same as the year before. However, it warned investors that this will be reduced to just 3p per share for 2016 and 2017.

The bank has been forced to put aside a further £1.45 billion to meet future Payment Protection Insurance (PPI) claims.  It said there had been “a slower than anticipated decline in claim volumes during the second half of 2015”.

In early trading the bank's shares fell sharply as the market digested the latest poor results from the UK banking sector. At one point, with shares down more than 10% trading in Barclays was suspended because of this volatility.

Barclays said it planned to split the bank into two divisions – Barclays UK and Barclays Corporate & International – by 2019 to boost future profitability. This restructuring would also see it start to sell down its stake in its African banking business – where it has had a presence for over 100 years. Barclays currently employs 45,000 people in Africa, and says it plans to reduce its stake in the region over two to three years.  

Laith Khalaf of Hargreaves Lansdown said:  “Cleaning is still very much in progress at Barclays, as the group seeks to focus its business around its core strength and mop up grisly legacy bits that are still weighing the bank down.

“This philosophy is very much in vogue in the banking sector, where the sins of the past continue to loom large. To that end Barclays has now put aside £2.2 billion to cover PPI claims, and booked a £1.5 billion loss from the non-core businesses it is downsizing.

“Barclays has decided to jettison its African business, which will free up capital and get rid of an unwanted distraction as the bank continues its clean-up operations.”

The results are the first to be announced since Jes Staley, the new chief executive, took charge of the bank in December. He said the bank had now paid out a total of £20 billion in fines and taxes, which were holding back its ability to generate capital. He said his aim was to address the various conduct issues that still hung over the bank – and avoid new ones arising.

Khalaf added: “The new boss is clearly taking a big broom to Barclays’ operations in a bid to dramatically simplify the group. 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 information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Barclays PLC222.45 GBX-0.07Rating

About Author

Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for Morningstar.co.uk

© Copyright 2024 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Modern Slavery Statement        Cookie Settings        Disclosures