Barclays still a top pick after reported job cuts, says Shore Capital

Shore Capital has reiterated its 'buy' rating on Barclays after reports emerged that the bank is in the process of cutting around 5,000 jobs.

An article on Monday from Sky News indicated that Barclays is expected to announce that it has reduced its total employee base of 85,000 by 5,000 in 2023 when it reports its full-year results on 20 February, in an effort to address structural costs and improve profitability.

"It is understood that the majority of these roles will be lost from back office and central functions, implying that the impact on revenue will be limited," said Shore Capital analyst Gary Greenwood.

"The group looks set to replace lost capabilities through greater use of technology, for which the level of additional investment that may be required is unclear. In taking such action, management will need to ensure that there is no detriment to customer service levels or business controls."

The cost of the job losses is expected to a one-off charge of £750m, taken in the fourth quarter, according to Greenwood, with efficiency benefits expected to come in the aftermath.

"We expect Barclays to provide a more detailed update on its plans to reduce structural costs and improve profitability and so return on tangible equity at the group’s full year [...]. We make no changes to our forecasts ahead of the results and reiterate our positive stance," Greenwood said.

Shore Capital estimates a fair value price of 290p for Barclays, which implies a significant 87% upside on current prices, making it the broker's top pick among the mainstream UK banks.