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.
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: | 240.05p | MARKET VALUE: | £40.7bn | |
TOUCH: | 240-240.10p | 12-MONTH HIGH: | 244p | LOW: 121p |
DIVIDEND YIELD: | 1.2% | PE RATIO: | 26 | |
NET ASSET VALUE: | 382p | LEVERAGE: | 18.9 |
Year to 31 Dec | Total operating income (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
---|---|---|---|---|
2012 | 25.2 | 0.80 | -4.8 | 6.5 |
2013 | 28.4 | 2.87 | 3.8 | 6.5 |
2014 | 25.8 | 2.26 | -0.7 | 6.5 |
2015 | 22.0 | 1.15 | -3.7 | 6.5 |
2016 | 21.5 | 3.23 | 9.3 | 3 |
% change | -3 | +181 | - | -31 |
Ex-div: 2 Mar Payment: 5 Apr |