The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen here.
Not sure if investors here read this. https://www.ft.com/content/377e0105-80c3-4dee-a605-333ccecc1802?ftcamp=traffic/partner/feed_headline/us_yahoo/auddev
Board chairman answers to investor questions was disappointing and the side show of spice girl "stop" is just hilarious. No wonder why British stock market is so poor in past decades.
Congrats to longs! BARC is still grossly undervalued. BAC price/Q1'2023 is more than 30x and BARC is only 14.3x. BARC derives more than 72% revenue from US and Q1 US CC&P alone contributed more than 1.3B GPB revenue among 7.2B. CIB contributes almost 4B GPB revenue. There is no reason why BARC ratios not closer to US bank peers. With that, we retail investors should aim for 100% price appreciation from here. Cheers!
Morgan Stanley published Q1'23 earning estimates together with street consensus.
Group Q1 EPS 10p (MS) vs 9.2p (consensus)
Q1 TBV 311p (MS) vs 301p (consensus)
Return on TBV 13.5% (MS) vs 12.3% (consensus)
Morgan Stanley 1-year price target remains at 210p no change.
MS estimated dividend 2023 8p, 2024 9p, 2025 10p
The reduced share numbers from recent buybacks increase ~ 2.2% TBV. Per 2022 annual report, BARC has 295p TBV per share. The latest buy back increases this by 2.2% and retained earning from Q1 (say a conservative 5p), this together brings new TBV to 306.5p. Most US banks are trading at or above TBV. Barc price target should aim for the similar level. Applying 80% for a calculation, we can expect 245p, which is ~60% above current stock price.
To get a fair comparison of UK bank stock, particularly BARC, total UK bank market cap excluding HSBC and Standard Charter is about $99 billion, while US big banks amass $1099B after the recent crash. HSBC and Standard derive most of the revenue from Asia. It has a very small percentage in UK. If we apply a total bank market cap to national GDP ratio, UK banks are valued ~ 50% lower than US. Before the recent crash, this gap was even bigger.
The fundamental problem of UK low valuation is lacking of a constant stream of money inflow into stock market. In US, the retirement fund and company buy backs are the huge force behind the long bull market. It is a very effective value creation mechanism and an efficient machine to boost the innovation by rewarding the new startup companies.
Unfortunately, these two factors will not correct itself in near future. BARC should consider to spin off its US arm and list the shares in US to derive a higher valuation. The existing shareholders should benefit from this. This allows the BUK to serve the domestic dividend investors.
My holding of Barclays is also close to 10 years. It is really frustrating to hold this bank. On surface, the ratios point to a much higher valuation. But in reality, the bank just keeps disappointing investors.
For capital allocation, they are very stingy to dividend and buybacks, but they are very generous on employee compensation. The bonus pool for a year they over issued security is greater than dividend amount. How they can justify such behavior a "bonus" is beyond me. And the last is employee pension is from after tax profit?
Added a small tranche yesterday on the big drop. The price is out of 3-sigma Bollinger band, not conventional 2-sigma. It should have a nice bounce. Current dividend yield is above 5%. It is still higher than treasury bond where I got around 4%.