Barclays’ stock (NYSE: BCS) has lost 27% YTD, as compared to the 16% decline in the S&P500 over the same period. Further, it is currently trading at $8 per share, which is 28% below its fair value of $11 – Trefis’ estimate for Barclays’ valuation. The bank surpassed the consensus estimates of profit in the third quarter of 2022, with net revenues (revenues minus provisions for credit losses) improving 4% y-o-y to £5.57 billion. However, it decreased 11% y-o-y to $6.6 billion in dollar terms due to the negative impact of foreign exchange movements (Note – Barclays originally reports in GBP (Pound), the same has been converted to USD for ease of comparison). Barclays UK revenues increased in Q3 because of higher net interest income. Notably, the total group net interest income improved 35% y-o-y (in USD), thanks to higher interest rates and loan growth. On the flip side, the Barclays international unit suffered due to a significant drop in equity trading and lower investment banking revenues, partially offset by growth in FICC (fixed income. currency & commodity) trading and consumer, cards & payments units. Overall, the adjusted net income declined by 11% y-o-y to $1.78 billion.
The bank’s total revenues grew 4% y-o-y to $24.2 billion in the first nine months of 2022. However, this translated into net revenues of $23.3 billion – down 3%, due to an unfavorable build-up in provisions for credit losses. Further, the adjusted net income decreased 31% y-o-y to $5 billion.
Moving forward, we expect the trading revenues and net interest income to maintain their growth momentum in Q4. Overall, Barclays’ revenues are forecast to remain around $29.3 billion in FY2022. Additionally, BCS’s adjusted net income margin is likely to stabilize around 22%, leading to an adjusted net income of $6.3 billion and an annual EPS of $1.48. This coupled with a P/E multiple of just above 7x will lead to a valuation of $11.
|S&P 500 Return||3%||-16%||79%|
|Trefis Multi-Strategy Portfolio||3%||-20%||217%|
 Month-to-date and year-to-date as of 11/23/2022
 Cumulative total returns since the end of 2016