| Name | Barclays Plc. (BARC. LON) |
| Industry | Banking |
| Founded | 1896 |
| Headoffice | London |
| CEO | Jes Staley |
| Revenues | £21.8 billion, 2020; £21.6 billion, 2019. |
| Net income | £2.46 billion, 2020; £3.35 billion, 2019. |
| Competitors | HSBC, Credit Suisse, JPMorgan, Bank of America, Royal Bank of Scotland, NatWest, Citibank, Lloyds Bank, UBS |
Company overview:
Barclays is a British universal bank and operates as a holding company. Barclays is organized into two divisions that are as Barclays UK and Barclays International. The bank provides retail, investment, corporate, credit, and wealth management services in the UK and international markets. The bank is ranked 6th in global revenue ranking and is the largest non-US bank (Bloomberg, 2021). In 2021, Barclays brand value is £16.3 Billion (Mustoe, 2021), and it is ranked 33rd in BrandFinance Global Banking 500 and 48th in The Most Valuable European Brands (SyncForce, 2021).
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Barclays Strengths:
- Consistent profitability.
Barclays has delivered consistent profitability growth over the years. The bank profitability has remained over £3 billion in the last five years, even during Covid-19. In 2020, the bank profits were £3.49 billion in 2018, £4.35 in 2019 and £3.06 billion in 2020. - Eagle entrepreneurial innovation platform.
Barclays Eagle platform provides vital support to the entrepreneurial community through a national network of 24 labs. Barclays (2021) stated that the platform supports high-tech growth businesses through providing resources, technology and mentoring opportunities to develop and launch new business models and products. Barclays has supported 470 start-ups, and members have raised over £600m of funding. - Significant lending through government scheme (Ansoff matrix).
During Covid-19, Barclays penetrated the market through its role in facilitating the UK government scheme, developing and launching application portal,s and tackling operational challenges. During 2020, the bank has lent £10 billion under Bounce Back Loan Scheme (BBLS) and £1.5 Billion through the Business Interruption Loan Scheme (CBILS), which is equivalent to four years of traditional lending volumes (Barclays Plc, 2021). - Two-decade-long sponsorship of the English football premier league.
Since 2001, Barclays has remained sponsor and baking partner of the English Football Premiers League (Premier League, 2021). The sponsorship has continuously promoted Barclays brand image and recognition through the football league. - Diversified income segment.
Barclays has diversified income segments from the UK and international operations. For instance, the diagram below shows that personal banking in the UK contributes 16%, and global consumer cards and payments contribute 46% to the bank’s total income to mitigate business and market risks. - Sustainable financing (Business Sustainability).
Barclays has social and environment financing (£150 billion) and green financing (£150 billion) frameworks for business sustainability. In 2020, the bank had £61 billion in social, and environment-linked financing, an increase of 76% from £32.6 Billion in 2019. Under two frameworks, the bank has lent £125 billion to achieve sustainability across products, businesses, and geographies (Statista, 2021).
Barclays Weaknesses 2021:
- Massive credit impairment in 2021.
In 2020, the Covid-19 pandemic had deteriorated economic outlook, and impairment charges increased from £1,912m in 2019 to £4,838m. The expected credit loss provision has remained unstable, and the group loan loss rate has increased from 55bps in 2019 to 138bps in 2020 (Barclays Plc). - Revenues concentration in the UK.
In 2021, Barclays generated 52% (£11 Billion) of its income from the UK, and the US contributes 34% (£7.4 Billion) to the total income of the bank. The Europe and middle-east market income was 9% and 5% respectively as shown in the diagram below. - Barclays tops the list of most IT failures in the UK.
According to Read (2020), the banking customer in the UK experiences ten shutdowns each month. Barclays had reported 33 incidents in 2020, which were the highest in the banking sector, followed by NatWest had 23 incidents, and Lloyds Bank had 19 incidents. - The decline in personal banking income.
Barclay’s income from personal banking was decreased to £3,522 million (12%), reflecting lower unsecured lending and lower interest rates and offset growth in the deposit and mortgage market. Customers’ reduced spending and borrowings have resulted in lower debt sales and interest-earning lending segments (Barclays Plc). - The increasing cost of the derivatives market.
In recent years, the European regulators have introduced new legislation which requires clear reporting of over-the-counter (OTC) derivatives and comprehensive reports on non-cleared OTC derivatives. Gibson (2021) stated that the new regulation has increased the cost of operations and reduced liquidity for the bank due to following a recent legal context.
Barclays Opportunities 2021:
- Blockchain technology.
In financial service technology, the blockchain is an emerging trend to streamline processes. According to Arnold (2021), blockchain technology can help investment banks save $10 billion in clearing and settling processes through blockchain, especially in cross-border transactions. - Open banking.
The combination of bank and Fintech enable open banking that facilitates data networks with ease, security and flexibility. Global open banking is expected to grow $395 billion with a CAGR of 46% by 2026, as shown in the diagram below. The open banking partnership can help the customer with a consolidated view of financial accounts. - Chatbots and artificial intelligence.
Chatbots and artificial intelligence are revolutionizing the banking landscape. Singh (2021) stated that chatbots are AI-based applications that simulate human conversation and strengthen existing customer service channels. AI in the back office can automate processes such as risk management, product delivery, and marketing, which could reduce the need for employee hours and increase the speed of the operations.
Barclays Threats 2021:
- Poor customer satisfaction and fines.
Peachey (2021) stated that Barclays has a consistent problem of poor customer service. In 2021, the company was fined £26m by Financial Conduct Authority (FCA) for poor treatment of customers who experienced financial problems. FCA stated that the bank has known the difficulties in systems but failed to resolve the issues. Barclays has issued an apology for not providing excellent customer service. - Lack of ethnicity and diversity.
Surperformance (2021) analyzed that Barclays has poor ethnicity in the UK and global markets, as shown in the diagram below. Globally, 55% of bank employees are white, and 39% are Asian. The black and other ethnicity represent only 6% of total bank employees. The diversity situation is worst in the UK, and 81% of employees are white employees, and ‘other ethnicities’ represent 5% at the bank. - Global regulatory scrutiny.
Globally, Barclays is subject to multiple stress tests, including the European Banking Authority (EBA), Bank of England, the Federal Reserve Board (FRB), and the Federal Deposit Insurance Corporation (FDIC) (Lexis, 2021). The failure to get regulatory approval or regulatory stress test could limit capital distribution and affect balance sheets in specific subsidiaries. - Phishing scams and cyber hackers.
Barclays’ customers have remained the primary target of cybercriminals and hackers. Foy (2021) analyzed that in 2021, banks have issued scam warnings to customers for fake phone calls in which hackers asked people for bank details. The bank has been hit with a phishing scam using the Monzo account, which results in the theft of millions of pounds. - A decline in retail, leisure, and hospitality customers.
With Covid-19, the structural shift to online shopping, rising costs, and softening demand put pressure on sectors reliant on consumer discretionary spending, as shown in the diagram below. With repositioning these segments, the economic scenario remains uncertain and increases the risk for Barclay’s corporate portfolio because of interaction with landlords, retailers, and owners of entertainment facilities.
Barclays SWOT Analysis Conclusion:
Barclays is the 6th largest global bank, diversified income segments, consistent profitability, and sustainable financing strategy. However, the Covid-19 has presented challenges such as massive credit impairment, increasing cost of the derivatives market, and decline in the hospitality segment. Nonetheless, Barclays has financial resources and dynamic capabilities to respond to market and operational challenges and exploit new business opportunities to maintain market position in the banking industry.
References:
- Arnold, Martin (2021). Five ways banks are using blockchain — The Financial Times
- Barclays Plc (2021). Annual Reports.
- Bloomberg (2021). Barclays PLC – Company Profile.
- Foy, Simon (2021). Millions were stolen from Barclays accounts by Monzo fraudsters.
- Gibson (2021). European-market-infrastructure-regulation-for-derivatives-end-users-shift-in-responsibility-for-reporting.
- Lexis (2021). Regulators—financial services. 2021. 2021.
- Peachey, Kevin (2021). Barclays fined £26m for poor treatment of customers.
- Penser (2021). The Future of Open Banking and its Impact on Banking.
- Premier League (2021). Barclays.
- Read, Simon (2021). Barclays tops the list of banks with most IT shutdowns.
- Singh, Praveen (2021). Chatbots in Banking: Benefits, Examples & Trends.
- Statista (2021). Barclays profits before tax.
- Statista (2021). Percentage change in like-for-like sales of pub, bar and restaurant groups before the coronavirus (COVID-19) lockdown in Great Britain in March 2020.
- Statista (2021). Value of sustainable financing by Barclays PLC bank.
- Surperformance (2021). After pledging disclosure, many UK banks are still silent on race diversity data.
- SyncForce (2021). Barclays — Rankings per Brand.
