• For Lloyds Bank Pestle and Swot analysis, see Lloyds Bank Pestle & Swot.
• For HSBC Pestle and Swot analysis, see HSBC Pestle & Swot.
• For RBS Pestle and Swot analysis, see RBS Pestle & Swot.

1.0 INTRODUCTION 

Barclays is a British bank with operations in more than 50 countries including the US, Japan, India, Europe and many African countries. It is part of the UK big four, referring to the four largest UK-based banking groups which also include HSBC, Lloyds and RBS. Founded in 1690 by James Barclay, Barclays has operations in a diverse set of consumer and wholesale businesses including retail, wealth management, corporate lending, credit cards and mortgages. It currently operates its business via two clearly defined divisions-Barclays UK and Barclays International. Latest revenues for the year ending 31 December 2016 were approximately £22 billion on operating profits of £2.8 billion (Annual Report 2016).

2.0 Barclays PESTLE analysis 2016-2017(Opportunities and threats)

2016 was a pivotal year for Barclays, embarking on one of its largest restructurings in history designed to make bank smaller, better capitalised, and less leveraged and more geographically anchored on its core UK and US geographic markets. The major decision to exit Africa is part of the mega restructuring. The bank had to contend with regulatory pressures as well as effects of Brexit as examples of some of the major external macro factors impacting their operational environment.

PESTLE is a business strategy tool used in strategy to analyse such macro environments and identify how future trends in the political, economic, social, technological, environmental and legal environments might impact individual organisations within an industry. Firms then study the key drivers of change behind the PESTEL factors. These key drivers of change constitute opportunities and threats in a firm’s external environment and industry which can be overcome by focussing on strengths and eliminating weaknesses. This is why PESTLE is only a starting point since other frameworks such as Porters Five Forces and SWOT have to be used in conjunction to help firms like Barclays utilise internal core competencies so as to take advantage of opportunities while neutralising threats in its industry.

2.1 Political environment

2016 was a challenging political environment for Barclays, characterised by new regulatory capital rules from the UK government as well as the introduction of a new 8 percent surcharge on bank profits in January 2016. This surcharge is especially more taxing if a bank has an overseas subsidiary, which is why it impacted Barclay’s foreign subsidiary in Africa (Barclays Africa Group Limited) contributing to the major decision to sell down its shareholding from 62% to 50% in 2016 and a further planned future exit (Annual Report 2016).

However, the biggest shock was Brexit when in June 2016, Britain voted to leave the EU, a move predicted to cause both political and economic upheaval and uncertainty for not only UK based firms but also the UK economy in general, at least in the short term (Douglas and Gross 2016). 

2.2 Economic environment

The economic risk and uncertainty of a UK exit from Europe poses a significant challenge to many banks including Barclays. Depending on the eventual international agreement between Britain and the other EU member states, the potential implications to leave the EU are many, as evidenced by the consequent decline in the value of pound sterling against the major currencies including the dollar and Euro, a situation that could get worse if Britain does eventually leave the EU by 2020 (Davies 2017). For Barclays, Brexit does come with possible negative consequences for capital, operations and regulation, along with the impact for its employees, clients and customers (Annual Report 2016).

2.3 Social Environment

The social environment includes changes in demographics,lifestyles or changes in fashion, labour and social mobility. Social changes in general have the potential to either be threats or opportunities for banks such as Barclays. One such demographic change that is currently affecting Barclays developed core markets in the UK and US is the ageing population and what it means for future product and service offers. According to the Office for National Statistics (ONS), the UK median age has over the last 40 years increased from 33 years in 1974 to 40 years in 2014 (ONS 2015). The UK is further expected to see double-digit growth in the number of 55-64-year-olds by 2019. An ageing populationcomes with business opportunities for Barclays as pension age consumers have more incomes and earn higher disposable incomes. For Barclays and other banks, such a shift means a drive towards savings, investment and wealth management as a baseline service to meet the needs of pension age customers alongside credit and consumption services that have been growth drivers in the past (PwC 2016).

2.4 Technological environment

When it comes to the technological environment, the banking industry has reached a tipping point where digital capabilities are accelerating the evolution of banking so fast that literally every facet of banking can now be done online. The financial innovations with the potential to revolutionize finance and transform the international monetary ecosystem currently include blockchain technology, biometrics, robotic automation and the rise of FinTech firms (Lonergan 2016; CapGemini 2016). The rise of FinTechs, agile, digital players that are leveraging technology to enter financial markets with simple, easy-to-use, convenient, and cost-effective products and services to customers, has especially had a significant impact on the banking industry due to their disruptive technology (PwC 2016; CapGemini 2016).

On its part, Barclays continues to develop new technology and invest in digital and mobile capabilities to improve and differentiate their offering, while remaining constantly vigilant to and investing in, fraud prevention, cyber risk, IT security and the appropriate management of data (Annual Report 2016). Barclays is in fact one of a few banks that has started processing transactions based on Blockchain technology when together with innovative start-up company Wave became the first to execute a global trade transaction using blockchain technology. The new blockchain based system developed by Wave, uses distributed ledger technology to ensure that trading parties can see, transfer title and transmit shipping documents and other original trade documentation through a secure decentralised network. The new system could therefore speed up trade transactions, reduce costs for companies around the world and reduce the risk of documentary fraud (Annual Report 2016).

2.5 The Legal environment

In June 2017, Barclays and four former senior executives were charged with fraud by the Serious Fraud Office (SFO) over the bank’s dealings with Qatar at the height of the financial crisis (Binham 2017; Treanor 2017). The investigation concerns the events surrounding Barclay’s emergency fundraising and subsequent cash injection from an arm of Qatar’s sovereign wealth fund, Qatar Holdings (Binham 2017). The bank raised a total of £11.8billion from a number of investors including Qatar Holdings and others from Abu Dhabi. The investigation, which has been underway since August 2012 has finally led to criminal charges, the first levied against a high street UK bank and former senior management for activities during the financial crisis (Treanor 2017).

If found guilty, Barclays will face fines and could further tarnish Barclays reputation which has already taken a massive hit since the financial crisis for infractions such as the libor scandal of 2012 which resulted in a fine of $200million by the U.S. Commodity Futures Trading Commission (CFTC 2012). The Financial Conduct Authority has also raised a $1bn lawsuit against Barclays as well as a whistleblowing claim.

2.6 Environmental Factors

BarclaysPLC also recognizes the current trends in consumers and governments demanding businesses to reduce their carbon foot print.In its 2015 Citizenship Plan, the bank committed to reducing its own carbon foot print by reducing energy consumption primarily through sustainable development funding and carbon-offsetting initiatives (Annual Report 2017).

Figure 1: Barclays pestle analysis 2016-2017

3.0 Barclays bank BCG matrix

Barclays bank BCG matrix available upon request.

4.0 BARCLAYS SWOT ANALYSIS 2016-2017

A SWOT provides a reality check on British Airway’s internal and external situations and performance (see figure 2).

4.1 Strengths

• During the year 2016, Barclays sought to mitigate where possible the impact of many of the macro challenges and threats analysed in PESTLE (figure 1) such as Brexit and government regulatory pressure while also benefiting from the existing opportunities such as being one of a few banks that has started processing transactions based on Blockchain technology. As a result, the bank is now smaller, better capitalised, and less leveraged and more geographically anchored to its core UK and US geographic markets than before.
• Barclays enjoys strong brand reputation partly derived from a long history of service panning over 400 years, which has enabled it to build a strong brand over time across multiple countries and territories. This diversified geographic presence is one of Barclay’s core strengths.
• Thirdly, the company has a robust presence in the UK market enjoying leadership position in several important product and service segments such as Barclaycard payment solutions.     
• In this digital age, Barclays boasts technological capability as a core strength, ranked as the digital banking leader in the UK. As part of making technology a core competency, the bank has built new operations and technology centres in Radbroke, Northampton and Glasgow (Financial Times 2017).

4.2 Weaknesses

• Material legacy conduct issues are still holding Barclays back especially its technological and operating infrastructure which needs to be modernised and be cyber resilient (Financial Times 2017).
• Returns from Barclays’ core businesses particularly the corporate and investment banking segments in the US, are still short of where the bank needs them to be. So despite the significant uplift in market value in 2016 due to restructuring, the group is still trading at a 40% discount to book value (Financial Times 2017).
• African divesture is proving to be time consuming and costly with Barclays agreeing to pay its African subsidiary, Barclays Africa Group Ltd (BAGL), $972m as part of its separation agreement (Cashen 2017).

4.3 Opportunities

• The strategic divesture of its shareholding in Barclays Africa Group Ltd (BAGL) exiting more than 30 countries as part of the largest restructuring initiatives in its history will improve core return and eliminate drag from non-core, further progressing the resolution of historical conduct matters (Annual Report 2016).
• As one of a few banks that has started processing transactions based on Blockchain technology, Barclays is ahead of many legacy banks in terms of benefiting from the growth of digital banking.

4.4 Threats

• Brexit uncertainty is bad for many UK businesses including Barclays. Management have already come up with contingency plans to establish an enhanced presence inside the EU to handle Barclays EU activities within the borders of Europe should this be required as a result of the Brexit negotiations (Financial Times 2017).
• Regulatory pressure including new capital requirements.
• Introduction of a new 8 percent surcharge on bank profits in January 2016 by UK government.
• Legal proceedings by the Serious Fraud Office (SFO) over the bank’s dealings with Qatar at the height of the financial crisis (Binham 2017; Treanor 2017).

Figure 2: Barclays SWOT analysis 2016-2017

5.0 Barclays bank Five Forces Analysis

Five forces of Barclays bank available upon request.

Conclusion

2016 was a challenging political environment for Barclays, characterised by new regulatory capital rules from the UK government as well as the introduction of a new 8 percent surcharge on bank profits in January 2016, contributing to the major decision to sell down its Africa shareholding in 2016 and a further planned future exit. It also had to contend with Brexit uncertainity and the economic implications its likely to have capital, regulation and EU operations. Nevertheless, the bank remains a strong brand anchored in a 400 year history of trading, geographic diversification, strong market leadership in core markets and advanced technological capabilities. While material legacy conduct issues remain and weaken it, the divesture of African operations will improve core return and make Barclays a smaller, better capitalised and less leveraged operation anchored to its core markets of the US and UK.

References

Annual Report (2016) "Barclays Annual Report" [Online] at https://www.home.barclays/annual-report-2016.html

Binham, Caroline (2017) “SFO charges Barclays over Qatar fundraising” Financial Times [Online] at https://www.ft.com/content/7677670f-60e1-3c9a-82d7-9689e842e996 [Accessed 19 June 2017]

CapGemini (2016) “Top ten trends in banking 2017” available [Online] at https://www.uk.capgemini.com/resources/top-ten-trends-in-banking-2017 [Accessed 20 June 2017]

Cashen, Emily (2017) “Barclays sees annual profits almost triple to £3.2bn” World Finance [Online] at https://www.worldfinance.com/banking/barclays-sees-annual-profits-almost-triple-to-3-2bn [Accessed 20 June 2017]

CFTC (2012) “CFTC Orders Barclays to pay $200 Million Penalty for Attempted Manipulation of and False Reporting concerning Libor and Euribor Benchmark Interest Rates" [Online] at http://www.cftc.gov/PressRoom/PressReleases/pr6289-12 [Accessed 19 June 2017]

Financial Times (2017) “Barclays: AGM Statement” available [Online] at https://markets.ft.com/data/announce/full?dockey=1323-13220734-5OD9JKJV0G0NHTEP0OD423N310&mhq5j=e3 [Accessed 19 June 2017]

Lonergan, Kevin (2016) “How blockchain technology will revolutionise finance in emerging markets” Information Age [Online] at http://www.information-age.com/contactless-payments-tripled-last-year-3-billion-123461415/ [Accessed 21 June 2017]

ONS (2015) “Ageing of the UK population” available [Online] at http://webarchive.nationalarchives.gov.uk/20160105160709/http://www.ons.gov.uk [Accessed 21 June 2017]

PwC (2016) “Retail Banking 2020 report: Evolution or revolution?” available [Online] at https://www.pwc.com/gx/en/banking-capital-markets/banking-2020/assets/pwc-retail-banking-2020-evolution-or-revolution.pdf [Accessed 20 June 2017]

 Treanor, Jill (2017) “SFO charges Barclays and former bosses over 2008 Qatar fundraising” The Guardian [Online] at https://www.theguardian.com/business/2017/jun/20/sfo-charges-barclays-bank-executives-ceo-2008-qatar-fundraising [Accessed 19 June 2017]

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