New Barclays boss Jes Staley received a frosty reception in the City yesterday, as investors rejected his case for slashing dividends, sending the bank’s share price down by more than 10 per cent and wiping £2.3bn off its market value.
Investors recoiled when Barclays said it planned on paying a dividend of 3p for this year and next, down from the 6.5p payout for 2015, in an effort to shore up capital and absorb losses from selling off unwanted assets.
Just last year, Barclays chairman John McFarlane told investors “a high and progressive dividend will in future need to make up a significant portion of our annual total shareholder return”.
The bank announced the dividend cut alongside a major restructuring plan, which includes exiting its Africa business and refocusing the lender’s efforts on the UK and US markets.
Barclays also revealed yesterday that adjusted pre-tax profits were down two per cent for last year, to £5.4bn.
Staley, a former JP Morgan executive who took the reins of Barclays last December, pleaded with investors to take the tough medicine in order to enable the bank’s turnaround.
“We are acutely aware of our shareholders being tired of the time it has taken to restructure Barclays,” Staley told reporters yesterday afternoon.
But City analysts were unconvinced.
Edward Firth, head of European banks research at Macquarie, told City A.M.: “If you cut the dividend in order to invest in an investment bank in this current environment, you’ve got to expect that shareholders are going to throw a wobbly.”
Sandy Chen, a bank analyst at Cenkos Securities, wrote in a note yesterday afternoon: “Note to the board: don’t cut the dividend (again) without ample signalling beforehand. Note to the chief executive: don’t defend the investment bank, on the hope that its profitability will beat its cost of capital again.
Meanwhile, Ian Gordon, head of banks research at Investec, told City A.M. it was “rather peculiar” that the bank was giving guidance for a lower dividend next year, saying the signalling only “fed speculation about what fills the gap”.
“Are there higher-than expected conduct costs? Is there some deterioration in the core?” Gordon said.
Barclays shares closed the trading day down 8.1 per cent, at 158.10p per share.