Barclays PLC (LON: BARC)

Barclays PLC (LON: BARC) is an FTSE 100 Index listed British universal bank. It provides consumer banking and payments operations around the world, along with global corporate and investment banking services. It is the sixth-largest global investment bank.

On 28 April 2022, BARC will release Q1 FY22 results.

Recent Trend of Dividend Payments

BARC has shown a decent year on year growth of around 300% in the final dividend attributable for FY21. Moreover, the Company had declared a final dividend of 4 pence per share to be paid on 05 April 2022, while the ex-dividend date was 03 March 2022. In comparison, the Company had paid a final dividend of 1 penny per share for FY20. The total dividend attributable for FY21 stood at 6 pence per share.

(Data Source: LSE Website, Research done by Kalkine Group)

Growth Prospects

• Strong UK GDP Growth: According to the Office for National Statistics, the UK GDP grew by 0.8% in month-on-month terms in January 2022 after a 0.2% decline in December 2021.
• Robust Consumer & Payments Business: The accelerated economic recovery led to solid growth in UK mortgage lending and deposits. Furthermore, the consumer spending and payments volumes have gained strong momentum in the UK and the US during FY21.
• Solid Liquidity: BARC’s liquidity pool stood at £291 billion as of 31 December 2021 with a liquidity coverage ratio of approximately 168%, significantly ahead of the regulatory requirement of more than 100%. 

Key Risks 

• Ukraine Tension: The mounting concern over the Russian invasion in Ukraine can continue to weigh on the equity market.
• Strategic Agility: The top-line business would be adversely affected in case the strategy fails to deliver a sustainable business model with differentiated service offerings.
• Acquisition Risk: The financial position could be hampered due to the overvaluation of the target company, ineffective due diligence, and failure to identify proper synergies.

Key Fundamental and Shareholders Statistics of Barclays PLC. 

BlackRock Institutional Trust Company, N.A. is the most significant shareholder as it holds nearly 944.02 million shares as of 31 December 2021.    

Financial Highlights (for the year ended 31 December 2021, as of 23 February 2022)

(Source: Company Filings)

• Strong Profitability: Barclays delivered a record profit before tax of £8.4 billion and a return on tangible equity of 13.4%.
• Strong capital: The Common equity tier 1 ratio stood at 15.1% on 31 December 2021 (December 2020: 15.1%) and tangible net asset value per share increased to 9% to 292 pence.
• Net Credit Impairment: BARC reported a £0.7 billion Net credit impairment release for FY21 against £4.8 billion charges in FY20, positively driven by the improved macroeconomic outlook and benign credit environment.
  

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 14 March 2022 at 08:04 AM GMT, BARC’s shares were trading at GBX 163.26, up by around 1.34% against the previous day closing price. Stock 52-week High and Low were GBX 219.60 and GBX 142.04, respectively.

On a daily chart, the stock price is sustained between the lower Bollinger band and the middle Bollinger band. Hence, there could be an uptick in the stock price in the near term. Also, the 14-days RSI stood at ~38.94.

Valuation Methodology: Price/Book Approach (FY22E) (Illustrative)

Business Outlook

The Company has shown a solid business performance in FY21, with all operating divisions delivering double-digit returns. Moreover, the Company has also achieved record profitability because of an accelerated economic recovery and efficient cost management actions. Meanwhile, BARC aims to maintain an appropriate balance between delivering attractive total cash returns to shareholders, making business investments, and achieving a strong capital position. In terms of guidance, the Company would maintain a Return on Tangible Equity of greater than 10%, a cost-income ratio of less than 60% and a CET1 ratio ranging from 13% to 14% over the medium term. Overall, the Company remained well-equipped to generate consistent returns for the shareholders with a diversified business model and a solid economic recovery.

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Considering the strong UK GDP figures, record profitability during FY21, dividend growth, and support from the valuation as done using the above method, we have given a “Buy” recommendation on Barclays PLC at the current price of GBX 163.26 (as of 14 March 2022 at 08:04 AM GMT), with lower-double digit upside potential based on 0.50 Price/NTM Book value per share (approx.) on FY22E book value per share (approx.).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

Note 3: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 4: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 5: Dividend Yield may vary as per the stock price movement.  

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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