The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
Barc's market cap is now nearly 20% below NWG despite materially higher profitability. To my mind that is hard to justify and a gap that is likely to close over the remainder of this year assuming any more banana skins are avoided and the bank puts a little more priority into shareholder returns than previously. Hopefully it will have learnt a lesson from the dismal reception to its results and underwhelming shareholder payouts last time around. I don't think the board will be safe long term if they continue to preside over such a depressed valuation compared to peers.
Casapinos, I agree with what you say. to me, the upgrades are fairly underwhelming. I think a lot of analysts have had a downer on this stock and have seen it as a basket case for so long that they are finding it hard to adjust to the reality of the improvements that are taking place. I think a good update in May showing continuing progress could be a good catalyst here. If there is the addition of a decent dividend I think it will see your SP target pretty quickly.
Comparisons are good on revenue and bad on profits. However, it remains a premium brand, still growing sales and with new products coming to market which are all positive factors. Growth story is quite compelling if you believe it can eventually get better control over its costs. I'm not in a rush to sell but wouldn't add either. My guess is that this will eventually get back to profits growth or failing that will be taken over because its a brand that, with a big market player behind it, could be huge.
Warsaw - I agree but even Virgin Money is up 2% today so Barc is really lagging. I assume that's as a result of its history of dropping unpleasant surprises every so often. Absent any of those, this could be a good entry point.
Reducer that's my fear. Will be happy when we get past 31 March and divi paid. Barclays seems to have a more lowly rating than most US regional banks which have already shown extreme vulnerability and have Tier 1 capital of only around 8.5%. A bit odd. I'm hoping, after the way things dived after the last results announcement that the board will manage to be a bit more upbeat when reporting the first quarter.
Unhappy precedent in many ways as regulators cited 'a risk of the bank becoming illiquid, even if it remained solvent'. So much then for central banks as the lender of last resort. If the short sellers can instil panic, it's game over for any bank they choose to target in concert regardless of its solvency. I would have thought that will only encourage them to find more and more targets. Can't see it encouraging investors in the sector.
Very ugly and I guess the sharks will now just move onto the next target. Last week the Swiss authorities were claiming that CS had tier 1 capital of 14.1% and liquidity of 150% of the required minimum even after large withdrawals. I think it's hard to justify a wipe out of shareholders just because the shorters are baying for blood if the underlying fundamentals are actually ok. Will that really help ease contagion and panic or make it worse by making banks virtually un-investable?
Flashy/LWHL, Fred the Shred was not a fraudster. He was arrogant and made appallingly value destructive decisions for which he has been publicly humiliated and had his reputation destroyed. It's not a criminal offence to make bad decisions like buying ABN Amro. Some bankers did see the inside of a prison cell including those extradited to the US who have lost virtually everything. The board members like Fred liked to take the profits but in reality, never really understood what was going on in the underlying business. They are culpable for that but not criminals.
Reducer - not convinced this is about greed or bankers not learning lessons. I think Fred the Shred was certainly held accountable - no banker wants that. Clearly in 2008, capital levels were grossly inadequate and the banks had made reckless lending decisions plus suffering contagion from the holdings of AAA rated (the rating agencies never get the stick they deserve)- but in reality poor quality - packaged up US mortgages. Banks are always under the cosh when there are fears of contagion. It's all about confidence and I don't think banks can easily fight that. Even HSBC is significantly down and no-one thinks it is in any danger. Smaller banks are vulnerable to runs if there is a panic and until there is clarity about whom is exposed to who or what, the shorters will pile in to make a profit. Not sure there is any evidence that the big UK banks have not hedged their exposure to treasuries and at its last accounts, Barclays had over £200bn of cash and cash equivalents which is a massive amount of liquidity. If central banks are happy with a banks balance sheet, they should provide the liquidity needed to get through these kinds of panics. That is their job after all as lender of last resort to avoid unwarranted meltdowns. I always thought it was notable that Lehman UK, even after hundreds of millions of administrator costs from its liquidation, had a surplus at the end of the liquidation process.
I don't think so. I think it's an attempt to calm the markets and suggests that the Swiss believe Credit Suisse to be creditworthy or else they may have needed to take more drastic action.
The bigger UK banks have massive amounts of liquidity with many billions of cash and cash equivalents held in reserves and ultimately, assuming they have not messed up like SVB, should be able to rely on BOE as lender of last resort to pump in more liquidity if there was any threat of a run on deposits. Confidence is key with BOE backstop. Unless they are hiding something, it should take a massive shock to bring one of the big UK lenders down.
Not entirely sure why Barclays which is already more lowly valued than the other main UK banks is taking the biggest hit again. The mistrust in this bank is clearly at extraordinary levels - particularly given that Barclays avoided a bailout by the government in the last crash. I see JP Morgan down only a little over 1%.
Huge falls here. Presumably reflecting greater perceived risk of a run on the bank because of its relative size. Whilst that seems unlikely, I can see why not many buyers are being tempted at the moment even at these prices.
Huge falls here. Presumably reflecting greater perceived risk of a run on the bank because of its relative size. Whilst that seems unlikely, I can see why not many buyers are being tempted at the moment even at these prices.
Strong message to bank from the share price that they need to up their pay-outs to shareholders. Not good enough to lag the rest of the sector when headline profits are pretty good and there has been no make good for dividends lost in covid. Investment case is quite hard if there are not good dividends when profits are high as there is always the possibility of another mess up around the corner. Investment bank is hoovering up too much capital for the returns it is making.
Reducer I agree shareholder revolt required. The underperformance of this bank relative to its peers - despite the advantages of its diverse business model and the fact that it makes significant profits in the US which should generally suggest a higher rating - suggests the investment community have a total disdain and lack of trust for the board and management. The fact that the payments to shareholders are materially lower than those from the other banks despite profits being materially higher than those at NWG suggests either a lack of confidence in the banks prospects by the board or a desire to hoard cash to shore up their own bonus pots. The fact the CEO took home £5.2m despite presiding over the fiasco of the notes issuance which should, frankly, have resulted in his resignation, says it all. I think any investors looking at the UK banking sector will think this bank is cheap but until they have confidence that the board have the shareholders interests as a priority, the bank is only investable at a huge discount. I don't think the profit miss was the big thing. It's the paltry £500m buy-back which will do absolutely nothing to move the dial. From what I can see, there has been total silence from the bank following investors thumbs down to its results and strategy. They are probably too busy planning how they can maximise and justify their next round of bonuses because that is their number 1 priority.
Fleccy - 100% agree with your point about interest rate falls and rises being portrayed as bad news. The good news at the end of the day is that the interest rises seem to be boosting profits and hopefully will continue to do so.
Sk1 - not sure I agree on excessive dividends. They are currently around 5% of the share price. Not especially high and the buy-backs and dividends are not at the expense of investment as the bank is currently seeking to pay out some of its excess capital which is inflating the overall returns. A bank like Lloyds should be able to pay out 50% of its profits as normal dividends or buy backs which should equate to around £3bn a year at the moment supplemented with excess capital returns. That still leaves around £3bn a year to invest in the business which is pretty substantial and much more than was available in the PPI years when the share price was bizarrely higher than now.