London South East | The UK's favourite investor portal.

Evening All,

This is the usual three-weekly update from the Chartist Alistair Strang from Trends and Targets.

PLEASE NOTE: His title was "launched" at 7.51am when Bloomberg and the markets indicated a Bloodshed.

On the positive side he indicates:

"It is now the case where, from a Big Picture perspective, we can ask Barclays to trade above 505p to trigger happy days coming, currently calculating with the potential of gains to an initial 537p with our secondary, if beaten, at 599p and some potential hesitation."

Regards, Mr A

https://www.ii.co.uk/analysis-commentary/which-way-barclays-rally-stalls-ii537992?utm_source=sfmc&utm_medium=email&utm_campaign=DailyNewsletterCanvi+-+Purple+Background&utm_id=346858&sfmc_id=8534279

Good Evening @Rumpel and One and All,

I hope you are well my friend.

Many thanks for your kind words and as part of the "silent majority" taking the time out to submit a post.

Yes... In relation to Treasury Bonds... They’re held by pension funds, insurance companies, banks and investment funds. Which on paper are deemed independent financial institutions that manage the savings of millions of ordinary people. But what does independent actually mean?

All of these "independent financial institutions" encourage the government to adopt new ideas, technologies, or policies primarily by using lobbying firms, public affairs consultants, or policy advocates. If these "ideas" are taken up by the Government then in exchange they expect the "independent financial institutions" to "return favours" if so required in the future.

As already seen, Rachel Reeves announces in her budget on Wednesday 26 November 2025, that the Government advises no increase to the 3% Surcharge on top of the current 25% Corporation Tax for Banks operating in the UK. Then the following day, Thursday 27 November 2025, JP Morgan boss gives go-ahead for new £3bn tower in London after UK assurances of no increases of Bank taxes.

A coincidence? Purely by chance? Really? 🤔😂

Remember, all of these institutions are are all heavily regulated and directed by government-authorised bodies, and as such, must dance to the tune of the government, it's rulings and potential introduction and/or increases of Extra Tax Surcharges "to assist UK growth".

For any Banks operating in the UK, a 3% Surcharge on top of the current 25% Corporation Tax is applicable.

I am not aware of UK Pension Funds currently paying surcharges but have historically read on numerous occasions in the past "...that it was rumoured that if the they did not implement what was required that XXX or YYY would be introduced which ultimately would have a direct affect on the reduction of their future profitability."

Now does the likelihood of "independent financial institutions" dumping a small amount of U.S. Treasury Bonds, if encouraged to by the Government in exchange for the promise of no extra corporation taxes and/or a continuation of the current corporation tax policy for the current Governments tenure?

Welcome to the murky world of politics and finance NOT to be confused with conspiracy theory.

All in my humble opinion... please do your own research.

Good Luck!

Regards, Mr A

Should be aware of.

The combination of higher revenues but also higher costs and relatively stable credit costs has resulted in a profit of nearly £5 billion during the first nine months of 2025, up by 14% YoY, while for the full year the street expects the bottom line to reach close to £6.2 billion (+16% YoY). For 2026, current expectations are clearly bullish given that analysts are expecting Barclays to earn around £7.3 billion in the year, which represents annual growth of 18%. I see this as somewhat optimistic, and potentially earnings can be revised downwards over the coming months, as I see high-single-digit growth as much more likely considering current headwinds and risk related to rates in the U.K., potential regulatory costs, and caps on credit card rates in the U.S.

On the capital front, Barclays remains well capitalized with a CET1 ratio above 14% at the end of last September, being comfortably above its own internal target. This means the bank has an excess capital position and can continue its strategy of returning capital to shareholders both through dividends and share buybacks, while also pursuing business growth through targeted acquisitions.

Regarding its valuation, Barclays is currently trading at about 1.08x book value, a much higher valuation compared to when I last analysed it (0.84x book value at the time) due to a strong share price performance lately. As can be seen in the next graph, Barclays’ shares have re-rated strongly over the past year but are still trading at a discount to some of its U.K. peers, such as Lloyds or HSBC Holdings Plc (HSBC), that trade at 1.3x and 1.7x book value, respectively.

Conclusion

While Barclays PLC has performed quite well over the past year and is trading nowadays at a much higher valuation multiple than compared to a couple of years ago, I still think there is some upside potential ahead due to a discounted valuation compared to peers and also considering the improved profitability level that is expected ahead.

Having said that, there are certainly some risks in the short term that shouldn’t be neglected by investors that could derail the bank’s investment case, being quite important to analyse the bank’s guidance and outlook for the remainder of this year when it reports its annual earnings related to 2025 at the beginning of next month to see if its investment case remains strong or if investors should take profits. Thus, I maintain my Buy rating for the time being, but may review to Hold in the future as I see the risk-reward proposition less attractive than it was some months ago.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Beyond higher revenues expected over the coming quarters, another positive factor for higher profitability is the bank’s efforts to cut costs and improve efficiency across the group. During the first nine months of 2025, Barclays was able to reach more than £500 million in cost savings, which was its target for the full year, showing that it has done a good job in this respect. This is quite important to offset other cost pressures from inflation and regulation, but it was not enough to improve efficiency compared to previous quarters.

Indeed, its cost-to-income ratio was 63% in the last quarter, compared to 61% in the same quarter of 2024, being penalized by the integration of Tesco Bank and extraordinary costs of £235 million related to the motor finance issue in the U.K.

This issue is related to hidden or undisclosed commissions in car finance agreements, especially through dealerships, and can become the largest potential regulatory issue in the U.K. following the PPI scandal some years ago. The motor finance issue may cost between £8-13 billion for U.K. banks and specialized financial services companies in the country in redress costs, of which Lloyds Banking Group (LYG) and Close Brothers (CBGPY) should be the most exposed to this issue. Indeed, Lloyds has already made provisions around £1 billion related to this issue, while Barclays’ provisions amounted to £325 million at the end of last quarter, showing that it is much less exposed to potential compensation costs. Nevertheless, the regulator has not yet released final details on how much customers will be compensated, something that should happen in the coming months, and payments should start to be made by mid-year.

While I expect this issue to have a manageable impact on Barclays’ financial figures in the short term, it creates some uncertainty about its total costs over the coming quarters and could have some negative impact on the bank’s profitability ahead that should not be neglected by investors.

Regarding credit quality, there were no significant surprises in the third quarter of 2025, even though its loan loss ratio increased a little bit to 57 basis points (bps) of average loans, still within its guidance of 50-60 bps loan loss ratio over the cycle. In U.S. credit cards, credit quality also remained quite stable, which is a good sign that U.S. consumers continue to show strength. However, recent suggestions of a credit card cap rate of 10% in the U.S. may be a negative factor for Barclays’ profitability in this segment, even if credit quality remains solid during 2026.

This unit accounts for about 11% of Barclays’ overall profits, and an interest rate cap would certainly pressure the returns of the U.S. Consumer Bank unit, which reported a RoTE ratio of only 9.4% in 9M 2025, and could potentially put at risk the bank’s target of a RoTE ratio above 12% in 2026. While it’s not certain a cap will become law, this is another risk that investors shou

Regarding revenues, there has been some slowdown in recent months, which led to stable revenues on a quarterly basis during Q3 2025, largely explained by lower revenues in capital markets activities following an extraordinarily strong Q2 due to higher customer activity related to the U.S. trade war back in April. On the other hand, revenues in the Retail & Corporate segment performed better, up by 6% quarter-on-quarter, which is encouraging for revenue growth ahead, as this unit has a more recurring revenue profile over the medium to long term.

Another supportive factor for increasing revenues in Q4 2025 and also during 2026 is the bank’s structural hedge income, which helps to offset pressure from lower interest rates in the U.K. While the notional amount of the structural hedge book has been stable at about £232-233 billion over the last year, the average yield of this book was only about 2.5% over the last quarter. This rate is still lower than what the bank can get when reinvesting maturing securities, explaining why the structural hedge income is expected to maintain an upward trend over the next few quarters despite lower market rates.

Indeed, the average hedge duration of this book increased as Barclays reinvested maturities toward longer-dated securities, pushing the average duration of the structural hedge book to around 3.5 years at the end of last quarter (from 3 years at the end of last June). The bank has reinvested at yields between 3.5-4% in recent months, leading to higher income from the structural hedge book, a trend that is expected to persist during 2026 and eventually 2027. This is expected to generate some £5.9 billion net interest income (NII) in 2025, representing an increase of £1.2 billion from the previous year, and should generate around £7 billion in 2026, which represents about 37% of its total NII.

This shows that the structural hedge income is quite important for Barclays to maintain top-line growth ahead, especially during a period of declining interest rates by the Bank of England. The last cut was made in December to 3.75%, reaching the lowest level since early 2023, and more cuts are expected over the coming months as inflation has eased in the U.K., and the central bank thinks the monetary policy no longer needs to be as restrictive.

Despite headwinds from lower rates, the market is expecting Barclays to report total revenues of nearly £29 billion in 2025 (+8% YoY) and around £30.6 billion in 2026 (+5.4% YoY), showing that Barclays’ interest rate sensitivity has been reduced in large part due to its efforts to increase the structural hedge income. Another potential positive factor for the bank’s NII resilience during 2026 is that the average cost of deposits usually reacts more rapidly to lower market rates than asset yields, being an important factor for the bank to protect its business margins.

Summary

• Barclays PLC has delivered strong operating performance, with shares up 51% since last May and profitability exceeding initial targets.

• BCS raised its 2025 RoTE guidance above 11% and expects over 12% in 2026, driven by resilient revenues and effective cost control.

• Structural hedge income and cost savings underpin earnings growth, but regulatory risks and potential U.S. credit card rate caps warrant caution.

• I maintain a Buy rating for BCS due to discounted valuation versus peers, though risk-reward is less compelling than several months ago.

As I’ve covered in the past, I turned bullish on Barclays PLC (BCS) back in May last year as the bank was reporting a very good operating performance, and its valuation was much lower compared to other European banks, which didn’t seem to be warranted. This BCS recommendation has been quite positive, given that its shares have increased by more than 51% since then and have clearly outperformed the SPDR® S&P 500 ETF Trust (SPY) during the same period, as can be seen in the next graph.

Since my last article on Barclays, the bank has reported its earnings related to the third quarter and nine months of 2025, which have maintained a positive operating momentum and resulted in slightly improved guidance for the full year 2025.

Indeed, Barclays reported total revenues of £7.2 billion in Q3 2025, up by 9% YoY, and its profitability measured by the return on tangible equity (RoTE) ratio was 10.6% in the quarter. During the first nine months of the year (9M 2025), its RoTE ratio was 12.3%, which is significantly higher than its target for the full year set at the beginning of the year of around 11%.

Due to its stronger performance than expected over the past few quarters, Barclays increased its guidance and now expects to achieve a RoTE ratio above 11% for the full year 2025, while for 2026 it is expecting a RoTE ratio above 12%. This shows that Barclays seems to be positive about its business outlook in the short term and expects earnings to keep growing over the next few quarters, as a higher RoTE ratio is mainly justified by higher profitability and not a lower level of capital, as the bank maintained unchanged its CET1 ratio target between 13-14% over the medium term.

Therefore, higher profitability is supported both by higher revenues expected ahead and good cost control, as the bank has a cost-cutting program ongoing that is already generating significant expense reductions, and this trend should continue over the next year.

Latest Share Chat

Member Info for MrAltruistic

Followers

Following

Posts (Last 30 Days)

Posts (All Time)

Last Post

Member Since

Share Chat Post Distribution (Last 30 Days)

Activity Log (Last 30 Days)

Latest Share Chat

Member Info for MrAltruistic

Followers

Following

Posts (Last 30 Days)

Posts (All Time)

Last Post

Member Since

Share Chat Post Distribution (Last 30 Days)

Activity Log (Last 30 Days)

Please enter at least 2 characters

No results found

Search results

Recently viewed

Trending