To deliver £1.7bn of savings by 2015, 1,800 job losses are planned in investment banking with another 1,900 jobs set to go in the European retail and business banking division. Analyst Ian Gordon of Investec Securities thinks that should cut the cost-to-income ratio to a more efficient 58.8 per cent by 2015, compared with 64 per cent now. The plan "implies upgrades if the market believes it," says Mr Gordon.
Barclays' performance was less exciting and headlines profits slumped, despite a £200m fall in the group credit impairment charge to £3.6bn. That partly reflected a £1.6bn hit from payment protection insurance provisions, up from £1bn in 2011, and an £850m charge against redress for mis-selling interest rate products. But total income also fell 23 per cent, helped by big falls in trading and investment income.
Strip out PPI redress provisions and the UK retail banking unit reported a 4 per cent rise in adjusted pre-tax profit to £1.47bn, helped by a 50 per cent fall in the unit's bad debt charge. Barclaycard performed well, too, with a 22 per cent fall in the bad debt charge helping adjusted profit up 25 per cent £1.51bn. The investment bank, meanwhile, benefited from increased market liquidity and higher client volumes - boosting adjusted profits 37 per cent to £4.1bn. However, the European business posted a £239m loss, while the African operation's profit fell sharply, amid rising bad debts and weak South African mortgage conditions.
Prior to these figures, Investec was forecasting 2013 adjusted EPS of 41.4p (from 34.5p in 2012).
|ORD PRICE:||325.2p||MARKET VALUE:||£39.8bn|
|TOUCH:||325-325.2p||12-MONTH HIGH:||326p||LOW: 148p|
|DIVIDEND YIELD:||2.0%||PE RATIO:||na|
|NET ASSET VALUE:||438p|
|Year to 31 Dec||Pre-tax profit (£bn)||Earnings per share (p)||Dividend per share (p)|
Ex-div: 20 Feb
Payment: 15 Mar
European Central Bank intervention has left a eurozone default far less likely, so Barclays' hefty exposure to Spain and Italy - £23bn in each case - is less worrying. Indeed, that more stable backdrop has helped the shares soar since August, and they now trade on 0.87 times forecast net tangible assets - in line with other UK-focused banks. Restructuring efforts hold promise, too. But with trading mixed, and more reputational worries ahead as regulators probe the terms of 2008's Qatar capital injection, don't expect much more upside. Hold.
Last IC view: Hold, 292.5p, 7 February 2012