Welcome to “the future”
Double-digit core returns at Barclays (LON:BARC) in the first half are a welcome sight and shutting the door on the non-core rundown to the extent that CEO Jes Staley could state “we’re done with restructuring” rubber stamps reassuring progress. Perhaps Staley edges a toe into the realms of hyperbole in going on to say that Barclays is now “the bank that we want to be in the future”. The £1.2bn loss in H1 is indeed now a thing of the past, as is the additional £1.1bn impairment from the BAGL sale. There’s no question either that the BAGL exit has progressed satisfactorily—even a touch faster than expected considering ongoing economic and political uncertainty in South Africa. On the other hand, Barclays’ flagging of an 18-month window for regulatory deconsolidation opens the door to further impairments, albeit a rise of ~26 basis points in the regulatory capital buffer that the group forecasts during that time and lack of Common Equity Tier 1 impact in H1 are an offsetting positive.
The search for significance
Whilst well below HSBC’s likely full-year ratio of slightly more than 14%, Barclays’, foreseen at c.13.4%, implies ample progress in the group’s ability to enhance attributable returns –eventually. Especially if we remember that Barclays’ ratio was at 11.4% around a year ago. Group return on tangible equity (RoTE) at 8.1% by the half year is, as Staley himself admits in his video, not where the group wants to be—preferably above 10%. All told, the impression is that the goal won’t be hit in the current calendar year, thereby pushing the date Barclays may signal a significant rise into 2019. Official guidance for payment of a “significant proportion” of earnings remains “over time”. Return on tangible shareholder equity stood still at 3.8% in the half. Or, it actually retreated 200 basis points to 1.8%, including BAGL impact. And half-year adjusted profit missed expectations.
Welcome progress overall, but movement back to satisfactory sustainable growth and returns was still glacial in H1, underperforming key UK, European and U.S. rivals.
Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.