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Brace yourselves for a horrible day on the markets. FTSE collapse and into the £1.40's we go for Barcs.
@ ab121 & badjob: I'm with badjob here. I'll say it a 1,000 times, buy-backs have achieved nothing for shareholders in terms of the SP or reward. The SP sits at 1.53 when it was at £1.80+ before £3bn+ of buy-backs began 3 years ago. What choice has the Barclays board got when interest rates are above 5%, but to significantly ramp up the dividend? The board has to accept the fact that the way they have run the company over the last 15 years has driven the SP from a £7 share to a £3 share, then to a £2 share and now. for the last 5 years, to a £1.50 stock. Hoping the SP will rise simply because on the face of it, it looks cheap, is lazy and irrational thinking. It has been cheap for the last decade and getting cheaper and cheaper and cheaper. It has to change strategy and quickly, before £1.50 looks to be a very good SP (after next weeks inflation figures and Bailey's hatchet job, we may be looking at £1.40 or lower before the end of June). Better still let's have a US or Middle East bank move in and take it over. The current board have no idea.
@Redcrayon - You might have a long wait! The FTSE has fallen 400 points or thereabouts in the last 7 weeks in an un-arrested decline. Barclays has held up okay in that period, but was, and is, at a low base anyway. It's all about inflation, interest rates and recession. The next 2 weeks might be pivotal and I must say I am not hopeful. I predict the FED will hold rates, which will initially buoy the markets, but the subsequent cautious comments from Powell may 'pop the balloon'. The following week our own CPI data and interest rates decision, I fear will not go well. I suspect we will miss inflation forecasts again and UK markets will take fright at Bailey's actions - possible 0.5% increase? But one way or the other we need to see where this is heading, recession or tamed inflation and soft landing, because it has created too much uncertainty for too long now.
By close of play today, we should have the last of the 'debt ceiling' issues out of the way, when we see how the DOW reacts to the Senate passing the debt ceiling increase. Hopefully US bank issues stay out of the picture. The damage done to the FTSE and Barcs in recent weeks will then be down to concerns over inflation and interest rates. In the US hopefully Powell and the FED will follow expectations and pause on further interest rate hikes this month. It is rather trickier in the UK though. May CPI data is out on 21 June, where the forecast is +6.1%. Given that April was +8.7%, I just cannot see such a fall happening. The BOE meets the next day (22nd). Unfortunately, Jeremy Hunt has given Bailey a 'get out of jail free card' by telling him to get inflation down even if it means driving the economy into recession. I believe therefore we will see a 0.5% hike in rates in June. At the moment it seems the 'calm before the storm' but these rates are going to bite hard at some point, particularly when the millions of fixed rate mortgage deals are up for homeowners. Hopefully inflation can come down significantly in the next three months and the light at the end of the tunnel on interest rates can be seen and UK PLC can come out of it, relatively unscathed and avoid recession. I think Barcs half-year update on 27th July might be too soon to get a feel as to how the situation is affecting banks, but by the Q3 update on 24th October, I think we will know one way or the other, how damaging inflation and interest rate hikes have been to the UK economy and the Barcs SP. Still hopeful of making it to around £1.90 by year end.
Powell took to the stage at 11.00am ET in Washington today. Within half an hour of his speaking the DOW lost nearly 300 points and the FTSE nearly 40! I have yet to hear what he said, but presumably he's spooked investors that pausing interest rates next month is not a shooing. UK April CPI data out next week (24th).
I don't know if you are referring to Barc specifically Amichalskiuk, but I have certainly noticed it with the FTSE generally, the last couple of weeks. It has almost like clockwork, taken off in the morning, plummeted back down mid-morning and into afternoon, then attempted a bit of a recovery late afternoon, depending upon, and significantly influenced by, how the DOW is doing. I think though, it is the US banks and the worries with their mid-sized banks in particular, that is keeping Barcs flat right now, rather than significant concerns over inflation, interest rates and economic recessions and so on.
FTSE irrationally soared 40 points this morning to 7780, then predictably fell 70 points as BOE and Bailey prepared to take over proceedings. Meanwhile stateside, and PC West is being attacked again. From a Monday high of around $7 it is in strong decline, currently shedding 24% in pre-market today. I am hoping in the short term the FTSE and DOW will put CPI data and interest rate woes behind and bounce back - until the next set of data arrives. But BARCS won't lift anytime soon whilst concerns in the US mid-sized banks persist.
Trucks - with a holding of just over 40,000 you have just made me feel a whole lot better! I think the Germans call it schadenfreude. Good luck with it all my friend.
Right in part Amichalskiuk. But added to the mix is that Barcs is seen as a transatlantic bank. So when it kicks off with US banks, Barcs takes an extra hit over here. Of course, when everything is rosy in the US and the big US banks power on, Barcs never reaps the benefit of this.
@Badjob: I agree some of what you say. I don't think it's shorters attacking UK banks either. The FTSE itself is 3.5% off its highs of late February. Barcs (which had already dived around 8% after poorly received end of year results) has dived a further 14% since that date. Banks are inherently risky, because they are the first to be hit in geo-political and economic bad news storms. In other words there is always something to put Barcs SP on its backside and keep it there. Which is why I keep arguing that higher dividends (not buy backs) is the way to reward the risk taken. As I have mentioned on numerous occasions, the dividend paid based on the SP at the date of year end results was less than the interest a lot of banks were paying. How is that reward when the SP drops 25%? In Barcs case they always add to the bad news stories with self-inflicted wounds. Currently the blame does lie with inflation, US interest rates and US banks. When interest rates were rising it was 'good for banks'. That message soon changed to 'very bad for banks' as markets believed that inflation wasn't been tamed and all that was happening was that high interest rates were driving economies into recession and banks faced customer defaults (even though the current evidence seems to be that such defaults are more than offset by the money made from the rising rates). Perversely, the worry over rising interest rates has now switched to it causing banks to 'topple over'! And I don't see this issue been resolved anytime soon, because I do think the markets and the shorters are hunting out those US banks, one by one. So increased US rates and smaller US banks is the primary cause for the current suppressed SP. Without the US banks situation I think the Barcs SP would now be around £1.75. Disagree that the SP will respond to buy-backs, unless you are referring to a 13 year trajectory that I recall one poster referring to. It will need all the current nonsense that I refer to above, out of the way, and a lot healthier dividend return, before the SP makes any serious movement - and even then, it is likely that other risks will present themselves by then, so I am not holding my breath.
@Amichalskiuk: The blueprint has been established. The markets in general and short sellers specifically, like hyenas on the tail of a three-legged antelope, are picking these smaller US banks off. The FED, FDIC, larger banks watch from the side. When one of the banks gets so far in the mire, the FDIC steps in and offers it for sale to one of the larger banks. The hyenas have had their fill and move onto the next target. The FDIC take the troubled bank into receivership and in a pre-ordained arrangement, sell it to the larger bank. Like the lion, the larger bank takes the real meat out of the antelope. I see no reason why this will not replicate over and over, unless it gets disorderly and they all start toppling at once. These smaller banks are powerless to stop it, because the markets are against them. I cannot see any other conclusion for PACW, unless a larger bank bought it out before collapse and why would they?
@ab121: Yes ab, I am not holding out too much hope for your £2.70 well before the end of the year. All things equal based on the current climate, I expect Barcs to trade between £1.35 to £1.80 for most of the rest of the year. It might start raising hope again in December and early new year and threaten the £2 mark , but will fall back down the snake towards £1.50 thereafter. And those predictions are based on no more than Barclays history. But the last 14 years have provided a clear trajectory which tells me the history is hard to ignore. Past performance cannot be relied upon to predict future performance we are told - but Barclays tends to disprove this theory.
PACW is currently trading at $6. The attached article says that after the banking crisis commenced last month its key personnel, including the CEO spent nearly $1bn in buying stock in the company. Paul Taylor as CEO spent over $0.5bn at a stock price of $22.20. Clearly they are not in control here and have seriously misjudged the scale of the problem. https://www.marketwatch.com/story/pacwest-bancorp-insiders-bought-some-stock-as-it-tumbled-last-week-d08ecb76
@LWHL: Last weeks gains wiped out in a session and I fear plenty more pain to come this week and going forward. The market is scenting blood again in the US banking sector. And I bet Powell will shut his ears to the noise, raise rates again tomorrow and won't rule out further rate hikes. For those talking of a £2.39 target, I think we might be missing it by a pound.
Is it PACW next to be taken over followed by WAL followed by ? At least these US banks are forming an orderly queue to topple over. US bank shares tanking, DOW tanking so FTSE's tanking so Barcs is tanking. Another week to forget.
@triumph: I agree on a certain level with you. But what on earth were they thinking of not tying it off, first time around? The big banks put in £30bn uninsured deposits (or so we are told - were there caveats in the small print?). Presumably they are not going to get that back? I agree the sentiment about buying it once it falls into receivership, rather than before, but again I assume, only one of the banks will benefit from this? Imagine if Barclays put in say £5bn, as part of a consortium, to save a European bank, and it failed anyway and Barcs lost its £5bn. Then HSBC came along and buys up the ashes. What would we be saying about Barcs then!
@Mr A: it beggars belief what is going on stateside. It seems the US administration, major banks and FDIC are all like rabbits in the headlights waiting for the other to do something. The most obvious thing to happen now, is a run on all of these banks. Crikey, if i thought my bank was at risk i'd move my money out, even if my deposits were insured. Some of these banks have billions of deposits over the 250k insured threshold. It looks like the FDIC will take FRC over and then the same pressure will mount on the next bank in line. I never did like dominoes!
Currently at £1.57 SP is back down to below where it was last week!
After the US stock market had its best day in 4 months and the FTSE was expected to bounce back after recent falls, along came Nat West to produce results, so badly received, they not only brought down the whole financial sector, but single-handedly brought down the FTSE as well!
Yep, I hold my hands up and am pleased to say I called it wrong for Q1. Still feel that bank nonsense over the other side of the pond needs to be bottomed out for good though. And yep, I retain my general pessimism. Today has been a good day. We wait to see what follows.