Wednesday, 30 July 2014

Barclays - some numbers that were received well!

Barclays shares are up around 3% as I write...which is good news as I am a holder. The last time I posted on them a month or so ago (link here) was to observe that:

'...the Investment Bank - the much maligned and compressing Investment Bank - is potentially in for free...Now we all know about the capability for fines and the like and the Barclays management have been clear that the Investment Bank is going to get smaller...but there is some value.  A x4 PBT yields a £10.7bn value or around 65p a share.  Call it a revised 275p target? 27% odd upside and some scope for dividends...  Hmm'  

That 210p level does appear to be giving some support.



So what did today's numbers say?  Well nothing particularly new.  Yes there is an extra £900m for 'PPI redress' and lower investment banking income did help push down profit before tax but slowly there is a reduction in excitements...

Two aspects particularly interest me.  First core income trends are kind of fine (adjusting for the continuing investment bank compression). The Personal/corporate banking side was solid and Barclaycard continued to be a star. Even net interest margin played ball...

...and costs were cut across the board.  Unfortunate for those involved but for shareholder 'good' news:


So if they can hold onto/build the tangible asset base and maintain the core divisions 10-12% return on equity then the 275p target price mooted above is very attainable even with some ongoing 'surprises' on the litigation front.

Of course there is the continuing drag of the non-core side - hence the overall group 6.5% return on equity.  Clearly not an easy transformation BUT having watched the Citigroup evolution and even progress at RBS (link here) the drag should abate over time.

So not easy and certainly not flawless but some hope is apparent.  I stick with the conclusions of my sum-of-the-parts analysis back in June.  In fact I could possibly edge up numbers...but 275p is fine for a target today.  

No comments:

Post a Comment