Interactive Investor

ii view: Barclays’ key strength in evidence again

Balance sheet strength, a new share buyback and an attractive estimated future dividend. We assess prospects.

17th August 2023 11:58

by Keith Bowman from interactive investor

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First-half results to 30 June

  • Income up 9% to £13.5 billion
  • Pre-tax profit up 22% to £4.6 billion
  • Capital cushion or CET1 ratio of 13.8%, up from 13.6% in Q1
  • New £750 million share buyback programme
  • Interim dividend up 20% to 2.7p per share

Chief executive CS Venkatakrishnan said:We have positioned Barclays carefully for this mixed macroeconomic environment and delivered a consistent performance in the second quarter. Through our diverse sources of income, prudent risk management, and ongoing cost discipline we have again demonstrated the stability and strength of the franchise we have built over many years. 

“This means we are able to distribute increased capital returns to shareholders, while providing targeted support to our customers and clients. Looking forward, we are very confident of meeting our targets for the full year.

ii round-up:

Barclays (LSE:BARC) operates across the two broad divisions of the UK and International. It conducts business in the three arenas of personal and corporate banking, credit card lending, and global investment banking. 

For a round-up of these latest results announced on 27 July, please click here.

ii view:

Tracing its roots back to 1690, Barclays today employs more than 80,000 people. A constituent of the FTSE 100 index, its rivals include Lloyds Banking Group (LSE:LLOY) and NatWest Group (LSE:NWG) in the UK, although its business mix offers some similarities to US banking giant JPMorgan Chase & Co (NYSE:JPM). The UK generates its largest slice of revenues at around 60%, followed by the Americas at 25%, and the rest of the world the balance. 

Its three core strategic aims remain 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. 

For investors, a more challenging economic backdrop has seen revenues for its investment banking operations retreating as customers potentially await clarity before pushing M&A transactions. Bad debt provisions have been added to, albeit at a lower level than analysts had expected, while challenges for US regional banks have arguably dented investor confidence in the broader industry. 

On the upside, its diverse business model regularly sees challenges at one division countered by gains elsewhere. A capital cushion of 13.8% remains at the upper end of management’s 13% to 14% target range, a concentration on squeezing costs persists, while shareholder returns include both a new share buyback programme of up to £750 million and an estimated future dividend yield of over 5%. 

On balance, and while room for caution persists, this diverse business looks to remain deserving of its place in many diversified investor portfolios.  

Positives

  • Business diversification
  • Attractive dividend yield (not guaranteed)

Negatives

  • Uncertain economic outlook
  • Previous litigation and conduct issues

The average rating of stock market analysts:

Buy

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