Are Barclays' Restructuring Efforts Key to Boosting Profitability?

Barclays PLC BCS has been taking steps to divest unprofitable/less profitable operations and save expenses through business streamlining, while deploying the capital into higher revenue-generating areas.

In February, Barclays sold its consumer finance business in Germany. Last year, the company transformed its operating divisions and divested its Italian mortgage portfolio and $1.1 billion in credit card receivables.
 
Through these efforts, Barclays recorded gross savings of £1 billion in 2024 and £150 million in the first quarter of 2025. The company targets to achieve gross efficiency savings of £0.5 billion this year. By 2026, management expects total gross efficiency savings to be £2 billion and the cost-to-income ratio to be in the high 50s. Its first-quarter 2025 cost-to-income ratio was 57%.
 
The company is deploying these savings in high-growth businesses and markets. This April, Barclays entered into a partnership with Brookfield Asset Management Ltd. to transform its payment acceptance business with plans to inject roughly £400 million. In March, the bank had announced a capital injection of more than INR2,300 crore (£210 million) into its India operations, following an injection of almost INR3,000 crore (£300 million) in 2021. Last year, the company acquired Tesco’s retail banking business, which complements its existing business. In 2023, Barclays acquired Kensington Mortgage, which bolstered its mortgage business.

The redeployment of capital into higher-growth businesses and markets through improving efficiency is a multifaceted approach to boosting profitability. Barclays remains committed to this approach, which is likely to help improve profitability over time.

What Are Barclays’ Peers Doing?

Barclays is not the only global bank that is restructuring its operations. Its peers, HSBC Holdings PLC HSBC and Deutsche Bank DB, are also engaged in similar business overhaul strategies to boost profitability.
 
In February 2025, HSBC announced a $1.5 billion cost-saving plan from the organizational simplification efforts (to be achieved by 2026). The bank plans to redeploy an additional $1.5 billion from the strategic reallocation of costs from non-strategic or low-returning activities into its core strategy, where it has competitive strength. Thus, HSBC is exiting from several global markets and focusing on Asia and the Middle East regions.

Similarly, this March, Christian Sewing, CEO of Deutsche Bank, stated that the bank plans to slash nearly 2,000 of its retail bank workforce in 2025 with a "significant" reduction in the number of branches. Deutsche Bank aims to enhance efficiency and reduce the cost-to-income ratio below 65% (61.2% in the first quarter of 2025) by 2025 end, with a key focus on the retail and private wealth unit.

BCS Price Performance, Valuation and Estimates

Shares of Barclays have gained 34.5% this year compared with the industry’s growth of 23%.

From a valuation standpoint, BCS trades at a forward price-to-earnings ratio of 7.3, well below the industry.

The Zacks Consensus Estimate for Barclays’ 2025 and 2026 earnings indicates year-over-year growth of 21.2% and 22.6%, respectively. Earnings estimates have been revised upward for both years over the past 30 days.

Barclays currently carries a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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