Shares in Barclays (LSE: BARC) have fallen by around 8% today after it announced a more-than-50% cut to its dividend in its full-year results. While it will pay a full dividend for the 2015 financial year of 6.5p per share, Barclays intends to pay just 3p per share in 2016 and in 2017 as it seeks to accelerate improvements to its financial position.

Allied to this is a decision to sell down the bank’s stake in Barclays Africa Group Limited. Through doing so and by cutting the dividend by 54%, Barclays believes that it will be able to increase its core equity tier 1 (CET1) ratio by as much as 100 basis points over the next two to three years as the bank seeks to maintain the CET1 ratio at 100-150 basis points above the regulatory minimum.

Legacy issues

Clearly, Barclays is still dealing with significant legacy issues. Evidence of this can be seen in the bank’s provisions for customer redress, which amounted to £2.7bn in 2015, and it seems plausible that further provisions will be taken over the medium term.

Such items negatively impacted Barclays’ reported results and were a major reason why its pre-tax profit fell by 8% to just under £2.1bn. However, when adjusting for such items, Barclays delivered a fall in pre-tax profit of 2%, with its core business continuing to perform reasonably well. Evidence of this can be seen in the 3% increase in pre-tax profit for its core operations.

A key reason for the improved profitability of Barclays’ core operations was reduced costs, with total adjusted operating expenses falling by 6%. However, Barclays continues to be relatively inefficient when compared to a number of its sector peers. An adjusted cost-to-income ratio of 69% is rather high and an adjusted return on equity of 5.8% represents a fall of 10 basis points versus the 2014 level. As a result, Barclays today announced an acceleration of the rundown of its non-core business as it seeks to speed up the significant changes being made across the business.

Long-term potential

Although investors have reacted rather negatively to today’s results, Barclays continues to offer excellent long-term growth potential. With the arrival of a new CEO, changes are to be expected and the bank’s new accelerated strategy appears to be sensible and likely to result in improved efficiency, financial stability and profitability in the long run. Certainly, it may involve a degree of short-term pain, but for long-term investors it seems to be a logical means of improving the performance of the bank as the industry moves towards UK ring-fencing rules in 2019.

As a result, Barclays appears to be a strong turnaround prospect. And with its shares trading on a price-to-book value (P/B) ratio of only 0.5, there appears to be significant capital gain potential on offer. Although the reduced dividend is a disappointment for income seekers, it should improve the bank’s long-term outlook and for investors who are able to buy now and hold for a number of years, Barclays seems to be an appealing purchase at the present time.

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Peter Stephens owns shares of Barclays. The Motley Fool UK has recommended Barclays. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.