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Barclays is emerging from the fog

The banking group plans to complete its sale of non-core businesses six months ahead of schedule
February 24, 2017

The picture seems to be getting clearer for Barclays (BARC). Management announced its intention to close down its non-core operations by June this year, six months earlier than planned. It expects to incur a loss before tax of £1bn for this business during 2017, weighted towards the first half. But lurking in the background is the US Department of Justice's investigation into the banking group's sale of mortgage-backed securities as the global property market overheated between 2005 and 2007.

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It was the non-core business that weighed on the banking group's income during 2016. This produced a loss of £1.1bn, from a £0.6bn profit in 2015. During the year the bank sold more of its non-core businesses including its southern European cards business and has also agreed the sale of its French retail operations. Non-core risk-weighted assets reduced by £22bn to £32bn.

Core income was up 6 per cent, but what really boosted pre-tax profit was a reduction in provisions for payment protection insurance, which fell from £2.7bn to £1bn. International business delivered the largest growth in income. Consumer, cards and payments segments here grew income by 21 per cent. But pre-tax profit excluding notable items fell 3 per cent to £3.7bn on the back of higher impairments and the translation of its dollar and euro operating expenses: overseas bankers just got that much more expensive. At least investment banking income was up 6 per cent as better trading in credit and foreign exchange made up for a drop in equities.

Barclays UK put in a fairly flat performance. Total loans were up a fraction at £166bn, primarily due to an increase in personal banking lending. In contrast, business loans fell £1bn to £15bn. Demand for Barclaycard remained steady, with balances growing marginally to £16.5bn. Credit impairments for the UK business increased more than a quarter due to a £200m charge from management's review of its impairment modelling for the cards portfolio.

Analysts at Shore Capital expect adjusted net tangible assets of 307p a share at the end of December 2017, up from 290p the previous year.

 

BARCLAYS (BARC)

ORD PRICE:240.05pMARKET VALUE:£40.7bn
TOUCH:240-240.10p12-MONTH HIGH:244pLOW: 121p
DIVIDEND YIELD:1.2%PE RATIO:26
NET ASSET VALUE:382pLEVERAGE:18.9

Year to 31 DecTotal operating income (£bn)Pre-tax profit (£bn)Earnings per share (p)Dividend per share (p)
201225.20.80-4.86.5
201328.42.873.86.5
201425.82.26-0.76.5
201522.01.15-3.76.5
201621.53.239.33
% change-3+181--31

Ex-div: 2 Mar

Payment: 5 Apr