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The quarterly results were broadly in line with the consensus expectations despite the management’s late confirmation of the less-supportive environment for the investment bank business. Unfortunately, the management failed to properly communicate on the evolution of the net interest margin and the rationale for the restructuring, leading to a sanguine share price reaction.
Companies: Barclays PLC
AlphaValue
The second quarter earnings surprise was fully attributable to the unexpected and unsustainable cost of risk reduction which more than offset weaker CIB revenues. The UK Retail Banking and Consumer Finance revenues were also marginally weaker than expected translating into slightly downgraded net interest margin guidance.
The group posted a strong set of results. Although it is necessary to be fully sustainable, it has enabled the management to reiterate its full-year guidance. The deposits’ stability and the group’s liquidity are also welcomed as BARC has accumulated large excess deposits.
The group was heavily sanctioned for having failed to beat the market’s expectations, posting contrarian net interest margin attrition and warning of limited interest rate tailwinds ahead.
The group posted a strong but unsustainable set of results supported by trading and hedging gains. The CET1 ratio is getting closer to the group’s threshold but the gain will be fully reversed by the anticipated unwinding of the two controversial pension transactions spotted by the regulator last April.
Management’s reluctance to commit to precise short-term guidance signals that the strong first-half operating performance cannot be taken for granted. The return to a sustainable decent profitability level (above 10%) remains a distant objective as reminded by the management itself.
The group posted record, albeit partly unsustainable, quarterly results, supported by the trading activities, interest rates and ongoing provision recoveries. Although the coming quarters will see some normalisation, these results enabled the company to reiterate its full-year RoTE guidance.
The announced accident is not good advertising but belongs to an operating risk which is covered (and remunerated) with dedicated equity. We see no reason to over-interpret the block sale that followed the announcement. Based on the past correlation, we believe that the rapid rise in US rates should be strongly supportive for the stock. The recent share price underperformance provides a strong Buy opportunity in our view.
The quarterly performance was boosted by net provision releases and tax gains which partly offset seasonally lower revenues. Management did not commit to any precise guidance but reiterated its confidence in the group’s ability to maintain the RoTE above 10% over the medium term.
Mr Staley’s shock departure should not prove too disruptive for the group, in our view, as he leaves the group in good shape and in preferred hands.
The third quarter continued to enjoy record CIB revenues and loan provision recoveries. Consensus expectations have now largely aligned with our projections, thus leaving limited upside potential in our view.
The quarter enjoyed stronger-than-expected provision releases and a partial reversal of the first quarter negative equity adjustments, whereas the DTA remeasurement offset ongoing restructuring charges.
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