Barclays’ stock (NYSE: BCS) has gained 8% YTD, which is at par with the 8% rise in the S&P500 over the same period. Further, it is currently trading at $8 per share, which is 24% below its fair value of $11 – Trefis’ estimate for Barclays’ valuation. The bank topped the consensus estimates of net profit in the fourth quarter, while the pre-tax figure was below expectations. It reported total revenues (after provisions for credit losses) of $6.2 billion – down 11% y-o-y, mainly due to higher provisions for credit losses and unfavorable foreign exchange movement. In currency-neutral terms, the bank’s Barclays UK and consumer, cards & payments revenues increased in the quarter, primarily driven by improvement in the net interest income. That said, the corporate & investment bank division posted negative growth due to lower investment bank revenues. On the cost front, the adjusted net income decreased 16% y-o-y to $1.22 billion in Q4. It was mainly due to higher operating expenses as a % of revenues. (Note – Barclays originally reports in GBP (Pound), the same has been converted to USD for ease of comparison).
The bank’s top line increased 2% y-o-y to $30.9 billion in 2022, primarily because of a 22% rise in the consumer, cards & payments segment. The improvement was due to higher net interest income (NII) – firm-wide NII increased 18% y-o-y. On the flip side, the corporate & investment bank revenues decreased 2% y-o-y due to a drop in corporate lending and investment banking income, partially offset by growth in FICC (fixed income, commodity, and currency) trading business. Despite revenue growth, the adjusted net income decreased by 27% y-o-y to $6.2 billion. It was due to a significant jump in litigation and conduct expenses.
Barclays’ revenues are forecast to touch $32.3 billion in FY2023. Additionally, BCS’s adjusted net income margin is likely to stabilize around 20%, leading to an adjusted net income of $6.35 billion and an annual GAAP EPS of $1.59. This coupled with a P/E multiple of 7x will lead to a valuation of $11.
|S&P 500 Return||2%||8%||85%|
|Trefis Multi-Strategy Portfolio||2%||13%||257%|
 Month-to-date and year-to-date as of 2/16/2023
 Cumulative total returns since the end of 2016