Barclays investors crave simpler bank as CEO Venkat prepares revamp9 Feb 2024 08:41
Morning All,
A fair write-up here i.m.h.o.
Regards, MrA
The Summary:
Investors lose faith
Barclays’ forward price to book ratio, a measure of its market valuation relative to assets, is at 0.34 - compared with 0.34 for Deutsche Bank, 0.56 at BNP Paribas, 0.82 at HSBC and 0.95 at UBS, based on LSEG data on Feb 8.
Investors said this reflects doubts about Barclays’ mix of businesses, and a growing consensus that a leaner, simpler bank could deliver stronger returns.
Barclays has sub-scale businesses which could fetch respectable price-tags if they were sold, five of the investors said, pointing out that several of these units were unlikely to be more than number three or four in their respective markets.
Disposals from Barclays’ Consumer, Cards & Payments (CCP) unit would be welcomed, four of the shareholders said, with one suggesting the international credit cards business applied a “complexity discount” to the bank’s overall valuation.
Reuters earlier reported the bank’s wider study of its global payments activities.
Capital unlocked by asset sales could support a more generous dividend or buyback programme or be reinvested in fee-earning businesses like wealth management, three investors said.
“In my opinion the only way the shares re-rate is a meaningful reduction in the size of the corporate and investment bank, and re-focus of the business on forecastable franchise based revenue streams,” said Ed Firth, analyst at KBW.
Jefferies analysts expect Barclays to propose a sharp rise in capital redistribution, rising to around £7 billion by end-2025, to help boost flagging shares.
There are signs short-sellers are retreating ahead of any potential move. Barclays has not featured in the top 10 of EMEA’s most heavily shorted large-cap banks since October, research from data firm Hazeltree showed.
Investors who spoke to Reuters expect the bank to upgrade its annual 10 per cent ROTE target to between 11 per cent and 13 per cent. In 2023, US bank JPMorgan achieved 21 per cent.
“I think people are struggling to believe that higher returns are deliverable and sustainable,” said Ben Ritchie, head of developed market equities at Abrdn.
“But once companies get the credit for consistent delivery, it is a game-changer,” he said.
Link: https://www.businesstimes.com.sg/companies-markets/banking-finance/barclays-investors-crave-simpler-bank-ceo-venkat-prepares-revamp
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