Barclays PLC

Barclays PLC (LON: BARC) is a London, United Kingdom-based Bank, operating through Consumer, Corporate and Investment banking divisions. It has three operating segments, namely Barclays UK, Barclays International and Head Office.
On 29^th April 2020, the company will announce its Q1 FY20 results.

Recent News
On 19^th March 2020, the company confirmed a listing application had been made for 26,491,561 ordinary shares of 25 pence each in the Company to the Financial Conduct Authority for the Shares to be admitted to the Official List and to the London Stock Exchange for trading.  Dealings in the Shares are projected to commence on 3rd April 2020.

Robust Financial Performance for the year ended 31^st December 2019

(Source: Presentation, Company Website)

For the fiscal year 2019, the company’s total income grew by 2 per cent to GBP 21.6 billionas compared to GBP 21.1 billion in the fiscal year 2018. Net operating income during the period was GBP 19.7 billion. Total operating expenses of the company declined by 5 per cent to GBP 15.4 billion as compared to GBP 16.2 billion in the fiscal year 2018. Profit before tax was GBP 4.35 billion against GBP 3.5 billion in the fiscal year 2018. Profit after tax during the period increased by 30 per cent to GBP 3.35 billion versus GBP 2.58 billion in FY2018. Attributable profit was up by 54 per cent to GBP 2.46 billion in FY2019 as compared to GBP 1.6 billion in the fiscal year 2018.

Share Price Performance

Daily Chart as on 23^rd March 2020, before the market closed (Source: Thomson Reuters)

On March 23, 2020, Barclays PLC shares were trading at GBX 86.01 at the time of writing before the market close (at 12:46 PM GMT), down by 3.50 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 192.99/GBX 73.04.

Valuation Methodology

*Peers: Lloyds banking Group PLC, Royal Bank of Scotland Group PLC, Standard Chartered PLC, Virgin Money UK PLC, and Metro Bank PLC.

Growth Catalyst

(Source: Presentation, Company Website)

The company delivered improved RoTE of 9% in line with the target; cost discipline allowing reinvestment in the business; the opportunity to grow in less capital intensive, technology-led areas; strong capital base enabling increased distributions; and the dividend was tripled since 2017 to 9 pence per share in 2019.

Conclusion
The company has reported a robust financial performance in the fiscal year 2019.The company has reduced its cost, which resulted in an increase in net profit margins. Barclays has a diversified consumer and wholesale businesses, across geographies with different currencies which helps the Group deliver year-on-year improvements in profitability during a period of macroeconomic uncertainty. The diversified customer base of customers plays a critical role in the growth of the bank. The low-interest-rate environment could become challenging to the company’s growth.

The bank is planning to increase its customer reach and enhance its market position.The Bank is planning to diversify the business with less capital-intensive structure. The company continue to believe that it is appropriate to target a return greater than 10%, and they are managing their business to achieve that. Recent Coronavirus outbreak could affect the performance of the company.


Based on the decent prospects which are supported by valuation done using the above method, we have given a “Buy” recommendation at the current price of GBX 79.78 (as on 23^rd March 2020, before the market close at 8:06 AM GMT) with lower double-digit upside potential based 0.3x NTM Price/Book Value (approx.) on FY20E book value per share (approx.).

Aviva PLC

Aviva PLC (LON: AV.) is a multinational composite insurer group. It has a strong international presence in Europe, Canada and Asia. It is the UK's largest insurer and is country's only large scale, a multi-line insurer.

Recent News
On 18^th March 2020, the company announced the publication of supplementary Euro Note Programme Prospectus.

On 6^th March 2020,the company released that it has agreed to leave from the Indonesia market by selling its entire shareholding in its PT Astra Aviva Life (is a joint venture in Indonesia) to PT Astra International TBK (Aviva's joint venture partner).

Solid Financial Progress for the year ended 31^st December 2019
For the financial year 2019, the Solvency II return on equity increased to 14.3% as compared with the previous year (2018: 12.5%). The company’s funds generation stood at £2.3 billion, representing an increase of 15% on a y-o-y basis. In 2019, the operational progress was reflected in improved IFRS results, with an increase of 6% in Operating profit, a surge of 8% in Operating EPS, and an improved in the basic EPS. Aviva has declared a final dividend per share of 21.40 pence, representing a full-year dividend per share of 30.9 pence in 2019, an increase of 3%.
 
Share Price Performance

Daily Chart as on 23^rd March 2020, before the market closed (Source: Thomson Reuters)

On March 23, 2020, Aviva PLC shares were trading at GBX 219.90 at the time of writing before the market close (at 11:50 AM GMT), down by 5.32 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 446.00/GBX 205.70.

Valuation Methodology

*Peers: RSA Insurance Group PLC, M&G PLC, Just Group PLC, and Phoenix Group Holdings PLC.

Conclusion
The significant uncertainty around macro trends compounded by COVID-19, particularly level of interest, foreign exchange and UK weather. The group continued to focus on growing underlying returns, controlling volatility, delivering consistent franchise growth and reducing debt over the medium term. The company has strong fundamentals with a robust and resilient balance sheet. The current expectations for 2020 underlying performance, includes BU growth particularly from UK Savings, UK annuities, and General Insurance, with GI working toward 2022 target of 95% COR; Aviva investors and UK protection expected to take time to rebuild profitability; and ongoing cost reduction programme. The long-term range for management actions of £0-200 million per annum for IFRS and £200 million per annum for OCG, as indicated at the recent capital markets day. The group can attain robust returns, and competitive advantage and the business will also take strong action across the portfolio.

Based on the decent prospects which are supported by valuation done using the above method, we have given a “Buy” recommendation at the current price of GBX 216.70 (as on 23^rd March 2020, before the market close at 8:25 AM GMT) with lower double-digit upside potential based 0.55x NTM Price/Book Value (approx.) on FY20E book value per share (approx.).
 
*All forecasted figures and Peer information have been taken from Thomson Reuters.

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