This report is an updated version of the report published on 23 May 2022 at 08:43 AM GMT+1.

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. 

Recent trend of dividend payments

The Company has a progressive dividend policy of paying its shareholders. The Group declared a total dividend of 6.0 pence per share in 2021, reflecting a significant increase from 1.0 pence per share in 2020.

 (Source: LSE, chart created by Kalkine Group) 

Growth Prospects

• Recovery in Consumer and Payments Segment: Barclays witnessed a recovery in the consumer and payments businesses on the back of decent UK mortgage lending, optimistic trends in UK and US consumer spending, and payments volumes.
• Capital Distribution: The company previously mentioned that it expects the £1 billion share buyback programme to commence in Q2FY22, and the decent performance in Q1FY22 provides a solid platform to aid the buyback of shares.

Key Risks 

• Litigation Risk: The company's business model makes it prone to the risk of litigation from regulatory bodies in view of its failure to maintain compliance with regulatory norms.
• Capital Adequacy Risk: The Group is exposed to capital adequacy risks and has reported a decline in Common Equity Tier 1 (CET1) ratio to 13.8% in Q1FY22, from 15.1% posted as of December 2021.
• Inflation: Inflation in the UK has soared to a 40-year high of 9% in April 2022, which may impact corporate profitability and consumer affordability. This might also influence credit growth and recovery.

Key Fundamental and Shareholders Statistics of Barclays PLC.

Qatar Investment Authority is the most significant shareholder as it holds nearly 1,017.46 million shares.              

Q1 FY22 Trading Update (for the quarter ended 31 March 2022, as on 28 April 2022)

(Source: Company Filings)

• Rise in Net Interest Income: The Group reported a robust 26% increase in net interest income to £2,341 million in Q1FY22, compared to £1,851 million in Q1FY21.
• Net Income: The company posted an attributable profit of £1.4 billion in Q1FY22, comprising litigation and conduct charges net of tax of £0.4 billion.
• Returns: Return on Tangible Equity (RoTE) stood at 11.5% during the quarter, with EPS being reflected at 8.4 pence. There was a slight improvement in tangible net asset value (TNAV) per share to 294 pence in Q1FY22, compared to 291 pence in December 2021 quarter.

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 20 May 2022, BARC’s shares were closed at GBX 152.72. Stock’s 52-week High and Low were GBX 219.60 and GBX 140.06, respectively.

On a daily chart, the stock has recently crossed its 20-day MA and has been trading above the trend line, indicating bullishness in prices in the near term.

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

Business Outlook

The Group delivered a resilient performance during Q1FY22, demonstrating income growth across all operating businesses. The company remains well-placed to navigate the present volatile market conditions supported by its diversified income streams, and it expects to deliver RoTE at greater than 10% for 2022. Going forward, BARC remains focused on three strategic priorities – to deliver the next-generation, digitised consumer financial services; to produce sustainable growth in the Corporate & Investment Bank; and leverage opportunities in the transition to a low-carbon economy.

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 decent fundamentals of the company, growth in Group income, positive market trends, diversified revenue profile, and support from the valuation as done using the above method, we have given a “Buy” recommendation on Barclays PLC at the closing market price of GBX 152.72 (as on 20 May 2022), with lower-double digit upside potential based on 0.49x Price/NTM Book value (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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