Ongoing legal disputes may have grabbed the headlines for Barclays (BARC) over the past year, but many shareholders judge whether its shares are worth holding primarily on their income prospects. On that count, management has come good. The banking heavyweight plans to restore the annual 6.5p a share dividend this year, beating consensus expectations of 5.2p. That followed an increase in its common equity tier one (CET1) ratio – calculated as the proportion of equity held over its risk-weighted assets (RWAs) – to 13.3 per cent, in line with its 13 per cent target rate.
However, that improvement was largely due to a £52.6bn reduction in RWAs following the sale of its stake in Barclays Africa, although it also booked a £2.5bn loss on the sale. Operating costs were also lower, helping improve its cost/income ratio to 73 per cent, from 76 per cent the previous year. That was despite it incurring £1.2bn in conduct and litigation charges, including £700m in additional provisions for payment protection insurance.
As some analysts had predicted, income was disappointing, largely due to a weak performance from Barclays International. Investment banking income was down 6 per cent to £9.9bn. The markets business suffered from lower volatility, which resulted in a 15 per cent decline in income. For consumer cards and payments, an 18 per cent uplift in credit impairments and other provisions resulted in a decline in pre-tax profit of almost a fifth.
Barclays UK put in a steadier performance. Net interest income was up marginally, thanks to deposit pricing initiatives and a 10 per cent increase in lending. However, the latter lever was predominately due to the inclusion of the Education, Social Housing and Local Authority portfolio from the non-core business, which also pulled down the net interest margin.
Analysts at Shore Capital expect adjusted net tangible assets of 295p a share at 31 December 2018, up from 276p a year earlier.
| BARCLAYS (BARC) | ||||
| ORD PRICE: | 212.45p | MARKET VALUE: | £36.3bn | |
| TOUCH: | 212.45-212.55p | 12-MONTH HIGH: | 244p | LOW: 177p |
| DIVIDEND YIELD: | 1.4% | PE RATIO: | 61 | |
| NET ASSET VALUE: | 375p | LEVERAGE: | 19.3 | |
| Year to 31 Dec | Total operating income (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
| 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 | 3.0 |
| 2017 | 21.1 | 3.54 | 3.5 | 3.0 |
| % change | -2 | +10 | -62 | |
| Ex-div: | 1 Mar | |||
| Payment: | 5 Apr |
