In many ways, 2016 was a year of political and economic upheaval, as unforeseen events such as Brexit and Donald Trump’s election triggered widespread volatility. These developments impacted heavily on the global markets, while also driving down business sentiment and dampening consumer confidence throughout the Western world.
The last 12 months have been largely productive for banking giant Barclays, however, who overcame significant turbulence to post their highest, fixed-income income revenues in more than two years. This came after a disappointing first quarter of 2016, during which time the company reported a 25% fall in profits amid reports that certain divisions were likely to be sold off.
The Revival of Barclays Fortunes: Can This Be Sustained in 2017?
After a brief period of consolidation, Barclays confirmed its revival by reported that profits rose by 35% during the third quarter, peaking at £837 million. This represented an increase from £619 million from the corresponding quarter in 2015, while it also superseded the estimates of five analysts surveyed by Bloomberg News. The increase was attributed to increased bond trading profits, while it also provided the first sign that Barclays restructuring program could yet yield significant dividends.
As we enter 2017, however, the question that remains is whether Barclays can continue its impressive, third quarter success into the New Year?
On a positive note, Barclays appears to be the one major bank that has fully embraced the spectre of Brexit. While other financial giants have struggled to come to terms with British Prime Minister Theresa May’s aggressive stance and pursuit of a hard Brexit, Barclays has created a new infrastructure that is designed to minimise the impact of leaving the EU. This will ultimately end in the creation of a simplified and global investment bank, which caters towards personal and corporate consumers offering a wide range of services from ISAs to mortgages.
Barclays restructuring is indicative of the bank’s bold and outward-looking philosophy, which will target international markets with renewed vigour in 2017. The decision to slash dividends and reinvest capital into the restructuring process has also proved to be inspired so far, as while it went against the grain in the UK banking sector it has already begun to pay dividends in a restricted, post-Brexit climate. This is reflected by the bank’s share price, which has now peaked at 235 pence after sinking to a 2016 nadir of 121 pence (prior to the restructuring, of course).
The Last Word: The Outlook for Barclays in 2017
On a note of caution, there is no doubt that Barclays’ strategy could encounter pitfalls in the year ahead. The focus on international markets and overseas operations will place a greater emphasis on foreign currencies which are vulnerable to fluctuations amid economic uncertainty and the ongoing Brexit negotiations. This could have a detrimental impact on Barclay’s execution in the next 12 months, particularly with the values of the pound and the Euro remaining vulnerable in the marketplace.
The business is focused on long-term growth and restructuring, however, as it aims to emerge as a global leader in the banking sector once the Brexit negotiations have been concluded. This means that while we are unlikely to see the bank increase its dividend until 2018 at the earliest (with experts suggesting that this would only be an incremental rise at best), Barclays should be well-placed to thrive and achieve organic growth as the global economy begins to settle. Not only does this underline the importance of independent thinking in corporate business, but it also reaffirms that not all banks are obsessed with lining the pockets of shareholders on a short-term basis.