Company Overview

Barclays PLC (BARC.L) is a global financial services provider offering personal and business banking, wholesale and commercial banking, and private and investment banking solutions to individuals, SMEs, corporates, and high-net-worth clients. It offers deposits and accounts, cards, loans, and investment solutions. The bank also offers services such as foreign exchange, transactional lending, mobile banking, premier banking, international banking, and online banking. Barclays caters to retail customers, small to medium-sized enterprises, and large corporates. The bank operates across Europe, Asia, Africa, the Middle East, and the Americas. Barclays is headquartered in London, the UK.

Key Statistics

 

Barclays Plc Key Products and Services
Products: Accounts and Deposits, International Savings Accounts, Personal Loans, Business Loans, Mortgages, Business Credit Cards, Commercial Insurance, Personal Insurance, Derivatives, Equities, Investment Products and Cards.

Services: International Banking, Small and Medium Enterprises Banking, Premier Banking, Private Banking, Forex Services, Online Banking, Mobile Banking, Relationship Services, Wealth Management, Relationship Services, Planning and Advisory Services.

Key Developments
On 22^nd February 2019, Company announced that Gerry Grimstone has decided to step down from his role as Non-Executive Director of Barclays Plc and Chairman of its subsidiary, effective from the end of February 2019, and Bank announced that Nigel Higgins selected as Chairman-elect of Barclays Plc, would join Barclays board on 1^st March 2019. On 21^st February 2019, Barclays reported its full-year financial result for the period ended on 31^st December 2018. On 21^st February 2019, Company announced full year and final dividend for the period ended 31^st December 2018 of GBP 6.5pence and 4.0pence per share. On 7^th August 2018, Company raised US$2.5 billion by an offering of Senior Notes. On 18^th May 2018, Bank acquired residential Mortgage Portfolio in Ireland for US$5.41 billion from Lloyds Bank. On 16^th May 2018, Banks raised US$1.5 billion by offering floating rate Senior Notes due 2024. On 16^th May 2018, Company raised US$1.75 billion by a public offering of 4.9712% fixed-to-floating rate senior notes due by 2029. On 24^th April 2018, Company has acquired two Mortgage Portfolio from Bradford and Bingley.

Key Management Employees

(Source: Company Annual Report 2018)

Financial Performance Highlights


(Source: Annual Report FY18)
 
Barclay’s total income stood at £21,136 million in FY18 compared with £21,076 million in FY17. Consolidated Net Interest Income for FY18 stood at £9,062 million against £9,845 million in FY17, declined by 8% in FY18. Net fee, commission and other income stood at £12,074 million in FY18 as compared with £11,231 million in FY17, increased by 7.5% during FY18. Group’s Pre-tax profit stood at £3.5 billion in FY18, including £2.2 billion of litigation and conduct charges, primarily related to £1.4 billion settlement with the US Department of Justice with regards to Residential Mortgage-Backed Securities. Bank’s UK pre-tax profit excluding litigation and conduct stood at £2.4 billion during FY18, decreased by 3% due to a 5% increase in Impairment charges. Barclay's operating expenses declined by 2% to £13.9 billion, excluding a charge of Guaranteed Minimum Pension (GMP). The cost to Income ration improved during FY18 to 66% compared with 68% in FY17. Earning per share stood at 21.9 pence, improved considerably during 2018, compared with negative EPS in FY17 of 3.5 pence. Banks' consolidated return on tangible equity (RoTE) stood at 8.5% in FY18 as compared with negative 1.2% in FY17. Barclay’s UK reported RoTE of 16.7% during FY18 compared with 17.8% in FY17, decreased mainly on account of decrease in PBT by 3% to £2.4 billion in FY18. Barclays International reported RoTE of 8.7% was considerably higher against 4.4% in FY17, primarily due to increase profit before tax by 10% to £3.9 billion.

Performance Measure (FY18 vs FY17)


Highlights
Group’s Return on average tangible shareholders improved considerably to 3.6% in FY18, compared with negative 3.6% in FY17. During FY18 cost income ratio increased to 77% compared with 73% in FY17, on account of increased interest rates. Higher Cost Income ratio shows that profit is shrinking. Basic Earning Per Share improved significantly during the year to 9.4 pence compared with negative 10.3 pence in FY17. Group’s annual dividend increased by 117% to 6.5 pence compared to 3.0 pence in FY17.

Stock Performance – 1 Yr.

Daily price chart as on March-04-2019, before market close. (Source: Thomson Reuters)

Highlights

On Mar-04-2019, shares of Barclays were quoting at GBX 164.62, before market closes, added 2.12 points or up by 1.305% against its previous day close price. During the last one-year shares have reached a 52w High of GBX 220.18 and a 52w low of GBX 144.99. At the close, shares were trading 26.02% below its 52w high and 12.07% above its 52w low. During the last one-year shares of Barclay's have delivered a one-year return of negative 23.08%, but one a year-to-date basis stock was up by 7.96% and in previous five-trading sessions stock was up by 4.07%. 5-day average daily volume was 81.79% above the 30-day average daily volume traded at the London Stock Exchange. The stock was trading above its 30days and 60days simple moving average by 1.29% and 3.1% respectively. Stock' beta of 0.72 indicates that shares are less volatile or risky compared to the benchmark index. Dividend Yield of 4.0% makes it attractive for income investors building their portfolio in the Banking arena.

Financial Ratios and Valuation

(Source: TR)

Valuation Methodology

Valuation Method 1

 
Valuation Method 2 (Cash Flow Per Share (FY19E) approximately)

 
While valuing Barclay’s on NTM Peers PE, we have considered its peers like Lloyds Banking Group PLC (NTM PE 8.0x), Royal Bank of Scotland Group PLC (NTM PE 8.0x), Standard Chartered PLC (NTM PE 9.9x), HSBC Holdings PLC (NTM PE11.0x), and Bank of Ireland Group PLC (NTM PE 7.9x) respectively.

Note: All forecasted figures and peers have been taken from Thomson Reuters. 

Conclusion
Adequate Capital, Cost efficiency, Adequate liquidity and Asset quality make Barclays attractive at current market price. Based on our PE and PCF based valuation we have given a BUY recommendation with single-digit upside potential (based on 8.8x NTM PE on FY19E EPS) or (based on 5.87x NTM PCF on FY19E cash flow).

*The buy recommendation is valid for the current stock price as covered in the report as on 4th March 2019.

Note- GBp or GBX are interchangeably used for Pence Sterling. 

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