ii view: room for improvement at Barclays

This FTSE 100 bank fell 15% in 2022 but the share price is up 7% so far in 2023. We assess prospects. 

Full-year results to 31 December

• Revenue up 14% to £25 billion
• Pre-tax profit down 14% to £7 billion
• Capital cushion or CET1 ratio of 13.9%, up from 13.8% in Q3
• Final dividend up 25% to 5p per share
• Total dividend for the year up 21% to 7.25p per share
• New share buyback programme of £500 million

Chief executive Mr Venkatakrishnan said:

"Barclays performed strongly in 2022. Each business delivered income growth, with Group income up 14%. We achieved our RoTE target of over 10%, maintained a strong Common Equity Tier 1 (CET1) capital ratio of 13.9%, and returned capital to shareholders. We are cautious about global economic conditions but continue to see growth opportunities across our businesses through 2023."

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ii round-up:

Barclays (LSE:BARC) operates across the two broad divisions of the UK and International. 

It conducts business in the three areas of personal and corporate banking, credit card lending, and global investment banking. 

For a round-up of these latest results announced on 15 February, please click here.

ii view:

Tracing its roots back to 1690, Barclays today employs over 80,000 people and is a constituent of the FTSE 100 index. It competes against rivals including Lloyds Banking Group (LSE:LLOY) and NatWest Group (LSE:NWG). Its three core strategic aims are to further digitise its consumer financial services including raising the number of customers using its mobile app; generate sustainable growth at its corporate and investment banking business; and capture opportunities as the world transitions to a low-carbon economy, including a new expanded target to facilitate $1 trillion of sustainable and transition financing by the end of 2030.

For investors, the uncertain economic outlook has seen bad debt provisions double from 2021. Costs in relation to litigation and conduct issues leave room for improvement, overall operating costs have risen 6%, while climate change concerns raise questions as to what sectors banks should and should not lend to. 

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To the upside, Barclays' diverse business model including investment banking, which many of its UK rivals exited post the financial crisis, should not be forgotten. The relatively new chief executive is working to address conduct issues, costs remain a focus, while the newly announced £500 million share buyback programme sits alongside an estimated future dividend yield in the region of 5%. 

On balance, and while reasons for caution persist, a valuation including a price-to-net asset value below most of its rivals gives grounds to remain patient.  

Positives

• Business diversification
• Relatively attractive dividend yield (not guaranteed)

Negatives

• Uncertain economic outlook
• Litigation and conduct issues

The average rating of stock market analysts:

Buy