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EPS 8.3p (42.5c vs estimate 40c in US.

UK rev and profit slightly down.

Investment QoQ wrt 2023 has 10% growth.

Income slightly lower than Q2 2023.

This is not an exciting report. Stock may move sideway or drift down. I have not found details of 2H buybacks yet. Anyone sees it?

NatWest beat Q2 earning estimate by a large margin. Stock is up 6.4% in NYSE. Will Barclays follow the same trend?

I don’t know the stock price reaction to the upcoming interest rate cute. But I think the chance is low for current price to be the peak in a year or two.

You can always buy it back even though it is a difficult decision. Along the way of BARC stock ascending, there were people sold at different prices. It is not too late to buy the shares back. Interest rate is heading into goldilocks which will be very favorable for bank stocks. This is in addition to the continuation of sizable buybacks every day.

Morgan Stanley has set Barclays stock price at 285p for a while. Below is the latest comments about Barclay's Q2.

2Q24 preview. We like Barclays into the quarter. We believe there is upside to revenues in

both UK margins and investment banking fees, while the market is under-appreciating the

recovery in US asset quality. In investment banking this quarter, Barclays has participated

in large deals, which, together with recovery in M&A and DCM markets, leaves us 11%

ahead of consensus on IB fees, or 2% ahead on IB total revenues. Additionally, at our US

financials Conference in June, peers called out a peak in Delinquencies, which we believe

will translate into lower provisions vs. the 610bp in 1Q24 and will also make its 400bp

CoR guidance for US Cards more achievable (see Barclays Bank: Feedback from our US

Financials Conference). All in, our numbers are c. 10% ahead of consensus 2024-2026E,

and on 0.6x TBV for a 12% ROTE 2026E, we are Overweight the name.

Barclays website lists the macroeconomic conditions for the stress test:

1. unemployment shot up to 10%, a 6.3% increase from Q4 2023

2. US GDP drops 8.5% over 9 quarters time.

3. Stock market drops 55%

4. Spread of corporate bond to 10yr T bill widens to 580bps

5. Housing price drops 36% and commercial real estate drops 40%.

I have to say these are very extreme cases only 2009 financial crisis met and exceeded this conditions. And Barclays US LLC passed the stress test easily.

Sorry for the typo in my previous post. I was in the rush.

1. expected next buyback announcement (Aug 1st) is £1.1-1.2B (2024 total ~ £2.1B)

2. 2024-2026 three year total buybacks ~£6.4B.

3. Daily money used in buyback is £10M or lower. I saw this amount changes from £7-8M per day in the earlier buyback days and now ~£10M per day.

What Barclays announced buyback for this round was £1B, not £500M. The bank also announced they will return more than £10B to shareholders through dividend and buybacks. Dividend will use ~£3.6B and buybacks ~£6.4B. We should expect by next earning Barclays to announce another round £2.1B-£2.2B buybacks. Based on current pace less than £10M cash is used for buyback, the first round buyback will cover every trading day till August 1st (next earning announcement date). If the buybacks control the money in this amount, the buybacks will happen in every single trading days for 3 years (starting from Feb 21, 2024). Cumulatively, we should see 2.1B to 3B shares bought back by Barclays after this 3-year buybacks.

I think BARC price jump relates more to company's shareholder returns. It is not due to higher revenue, better earning and booming economy. In past three years, both topline and bottom line are actually sliding. UK economy has been hovering around flatline. And I don't think investors believe company's goal of RoTE 12% and growth story. At best is the attitude is wait and see.

The key is Barclays net profit at such lukewarm growth and UK economy can buy itself out in just a few years and the bank is seriously doing it. The massive buyback simply points the logic hole in current stock valuation model, which assigns a 14% or higher capital cost and apply assumption in cash flow model, it then arrives at the numerical conclusion the bank is not creating value to shareholders, rather it is destroying values. The reality is opposite. The bank is very profitable and it will continue be so until a big recession and some stupid mistakes happens. Another round of cycle starts again.

I took a check from US back to UK many years ago. When I turned the dollar into sterling, NatWest simply took away 40% of my money. This is the way how they do business and make profit even though I was not happy about the loss.

I know there are many poor people in UK and US as well. Barclays and banks are not making money from that population group. You can not simply go through the tents in downtown Los Angles and take away the conclusion US economy and stock are done. It would completely wrong.

In short term, BARC seems over bought in many technical indicators. But for long term, there is a long way to go. You should cover your short position whenever there is a pull back. Nobody knows where they will push this stock to.

Using Graham's valuation formular sqrt(22.5*EPS*TNAV), the value is £5.06/sh. BARC may not hit that high, but many US stocks are trading in fashion or even more.

Barclays website has annual reports dating back to 1990. It includes all useful information.

For the stock price peak year 2005, 2006 and 2007 (right before financial crisis), net profit after tax were £3.409B, £4.541B and £4.392B respectively. Per share profit were: 52.6p, 69.8p and 66.7p. Dividend were: 26.6p, 31p and 34p.

End of year price of 2005, 2006 and 2007 were: 564.4p, 674.33p and 467.88p. The total share counts was 6.587B. If we finish 2024-2026 share buybacks, the total share counts will be ~ 2x 2007 end of year share counts.

Now let's take a look of the recent 3 year total profit. 2021, 2022 and 2023 were: £3.957B, £3.65B and £ 2.753B. 2022 had over issuance penalty and 2023 had restructuring cost. Excluding those silly cost, Barc profit in 2022 and 2023 were very close to 2005. 2021 was clearly higher than 2025. Using 2005 stock price 564p to scale to the estimated profit 10% RoTE 335p, we can earn 34p. The derived share price should be 364p. If we use 2006 as reference, stock price should be: 328p. Average of these two is 346p. If we use 2007 as the reference, stock price should be: 238p.

By year end of 2007, the financial crisis had been very clear. We saw large US banks failing. Today's price is even lower than 2007 year end price. It is hard to justify it. So a massive buyback makes a lot sense. At a normal year like 2005 and 2006, Barc stock should trade above 300p already.

In the past 15 years, barc stock has gone through a lengthy, painful down trend. Now, this trend just started to reverse. We should see a long up trend for EU banks in general and Barc specifically.

Do people hear long enough knowing what rest book values are. TNAV is just above 50B pound (335p per share). Goodwill is pretty clear 7B pound. What are “other” 14B pound assets are? It runs rather constant based on Barclays release from IR website.

Nearly all US banks PB are running above 1. But Barclays are more measured by TNAV. There are a large discrepancy between TNAV and total book value.

After May 2nd purchase, BARC total share count dropped below 15B ordinary shares. It has used £395M.

It seems as the number of shares purchased each day varies quite bit. In average, they used £8M for buyback each day. This pace will allow buyback covers everyday with £2B fund a year.

From July 2023 buyback to May 2, 2024, Barclay has bought back ~560M net shares (after offsetting employee stock dilution).

With this pace, we may see total share counts below 13B after 2026. My estimate shows this will add ~£4.5B TNA. By 2026, TNA will be ~450p. Applying 0.8x, we should see 360p stock price exiting 2026. This is with the assumption that there is no deep recession from now to 2026. Let's see how it goes.

Morgan Stanley is very positive to BARC stock. The firm raised PT to 270p (bear case 125p, bullish case 350p).

Excerpts:

IB performance was mixed in the quarter, however better revenues in UK and US cards, together with better cost control drove the bottom line beat. Post results our 2025e/26e EPS moves up 2%. On 0.55x P/TBV 2024e for an 11% 2026e RoTE, we re-iterate our Overweight. Our PT increases to 270p.

Merril Lynch (Bank of America) - as usually negative PT190p

OK numbers, strategic challenge remains

A small headline beat turns into a miss on an underlying basis. While Barclays, has

reiterated its targets, there’s little evidence of progress so far. Investment Bank market

share loss continues and we’d expect UK growth to be a slow process, with 30% balance

sheet growth over three years still stretching. Positives are BUK margin expansion and

reiteration of cost targets even with the £120m BoE levy. Share buybacks are attractive

but we continue to see Barclays as strategically challenged and stay Underperform.

Q1 6% ahead reported, underlying miss

Attributable profit of £1,550m is 6% above consensus and down 13% YoY. Revenues and

provisions are 1% and 5% better than consensus respectively and costs are in line.

Excluding the £125m Visa B shares gain, income and earnings would be 1% and 2%

below consensus, with the miss likely bigger if adjusted for the unquantified legacy

investment gain in Head Office. A 13.4% CET1 ratio compares to 13.5% consensus with

risk weighted assets £7bn higher QoQ. Tangible book of 335p is up 1% QoQ.

So the market responded very favorably to BARC stock, let me put the positive here:

1. Q1 10.3p beat estimate 9p

2. Except US card RoTE ~5%, all other segment has demonstrated above 12% RoTE. So 12% RoTE is doable

3. 2024 full year RoTE c10.5. Using 335p TNA as base, this is ~35p EPS or more depending on TNA. This beat current US estimate ~30p by a large margin.

4. Q1 buybacks contributed 1p TNA. This is the beauty of PB less than 1. Per share tangible book value increased ~ £150M. This round buybacks will contribute another 4-5p. And full year £2B buybacks will contribute ~ 10p TNA per share which is equal to increase EPS by 1p.

I will monitor Morgan stanley and Merril Lyng say about the BARC Q1 earnings.

BUK and IB are all down except US card business increased 4%... topline revenue growth is much weaker than Duetch bank, which just announced the earning an hour or two ago. I'm not sure market response with such poor topline growth.

It seems a beat on EPS 10.3, income £7B, RoTE 12.3%, TNA 335p.

Still in progress reading IB and other details ....

Q1 EPS estimate 9.3p or 45c/ADR

Q2 EPS estimate 7p

Total income reference points:

Q1 2023 7.24B GBP

Q4 2023 5.6B GBP

Need to see top line yoy and QoQ growth. US investment banks are all doing good. Revenue all went up from last week earning report. Let’s what Barc reports tomorrow morning. US PDT is mid-night.

Disclaimer: my analysis does not factor in the scenario where a deep recession causes revaluation of asset value and EPS damage.

With the existence of a still sizable investment bank biz, which is anti cycle to UK retail banks. The damage to EPS could be very limited. Looking back 14 years, Barclay has only 1 year (2017) with red ink (-10.3p). Even with 2020 covid shock, Barclay is profitable when all other UK banks are red in the year.

So my simple comparison seems we will see 250p-350p when we reach 2026. Hopefully, we do not meet a very deep recession during the following 3 years.

Then I did a hypothetic analysis with a very pessimistic constant earning with ~£6.2B buyback to estimate share counts reduction and EPS/TNA boost.

Assuming 2024 EPS 30p, TNA 331p (per Q4 earning). I deducted dividend and buyback cost and applied the reduce share counts. For 2024, 2025 and 2026, I get TNA 362p, 395p and 432p, EPS 30p, 32p and 34p. Share counts reduce to 12.69B (assuming 2024 buyback average price 200p, 2025 220p and 2026 240p.

By end of 2026, TNA 432p, EPS 34p and share counts 12.69B. These metrics are very close to 2009-2012 timeframe TNA and EPS. The stock price then was between 250p-350p after bouncing back from early 2009.

My analysis has not factored in the additional earning from the retained EPS for profit growth. My ROA is below 10% as you can see. Still the stock shows healthy growth of per share asset and earning. If we apply 10% ROA, ESP will reach 43p.