Should I buy dirt cheap Barclays shares for 2024 and beyond?

Barclays shares are trading at a huge discount to the market right now. They also offer a decent dividend. Is this a great buying opportunity?

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Barclays (LSE: BARC) shares look very cheap at the moment. Currently, the banking giant sports a forward-looking price-to-earnings (P/E) ratio of just five – way below the market average.

Is it worth buying a few shares for my portfolio today? Let’s discuss.

A new plan to boost the share price

In recent years, Barclays shares haven’t been a great investment. Five years ago, the share price was near 160p. Today, it’s around the same level.

However, the company now has a plan to change this.

Indeed, last month, the bank announced a new three-year strategy designed to improve the bank’s performance and lift its share price. This will involve cost cuts, a management overhaul, and asset disposals.

Our new three-year plan is designed to further improve Barclays’ operational and financial performance, driving higher returns, and predictable, attractive shareholder distributions

Barclays CEO CS Venkatakrishnan

Looking ahead, Barclays is aiming to cut £1bn in group costs in 2024 and achieve total savings of £2bn by 2026. These cost cuts will mainly come from the investment bank and UK consumer bank.

Meanwhile, the group plans to prioritise its more profitable consumer and business lending operations (it plans to allocate an additional £30bn in risk-weighted assets to its UK retail bank by 2026), while reducing the proportion of assets accounted for by its investment bank, which has struggled in recent years.

It’s worth noting here that it’s going to reorganise its business into five new operating divisions to provide clearer disclosure on performance and management accountability.

And as part of the plan, the company is aiming to return at least £10bn of capital to shareholders between 2024 and 2026 through dividends and share buybacks. However, it has noted it has a “continued preference” for buybacks.

Execution will be key

I think Barclays is making the right moves here. And so do a lot of other investors. This was clear from the stock’s performance on the day the plan was announced – the share price jumped 9%.

Going forward however, the execution of the plan will be key to the stock’s performance. And there’s no guarantee the company will be able to deliver on its goals.

Here in the UK, the company is likely to face an intense level of competition in the years ahead. Not only will it be battling other traditional banks such as Lloyds and NatWest, but it is also going to have to fight off new digital challenger banks such as JP Morgan’s Chase and Goldman Sachs’ Marcus.

The good news is that there’s a decent dividend yield on offer at present, meaning that, if I was to buy the shares today, I would be being paid to wait for a turnaround. For 2023, the group declared total dividends of 8p per share, which translates to a yield of 4.9% at today’s share price.

However, given that banking is quite a volatile industry, and there’s a fair bit of economic uncertainty at present, I’m inclined to pass on the stock for now.

All things considered, I think there are better blue-chip shares to buy for my portfolio today.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays Plc and Lloyds Banking Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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