Shares in Barclays (BARC), gained 3% to 196p following the announcement of better than expected full year results to 31 December 2021. In addition, the group announced a £1 billion share buyback.
Barclay’s shares are only up 2% year to date, and currently sit 12% below their 12- month high, making them the weakest performer amongst the mainstream UK banks over the period.
This makes partly explains the more enthusiastic market response to Barclay’s results than that afforded to its peers.
EARNINGS BEAT
Reported profit before tax of £8.41 billion was ahead of analysts' forecasts of £8.12 billion. Earnings per share of 37.5p, beat analysts’ expectations of 34.6p. The full year dividend of 6p per share was marginally below estimates of 6.3p per share. Reported return on tangible equity of 13.4% was ahead of a consensus forecast of 12.4%.
Barclays UK and Credit Cards were the star performers of these results. Cards and Payments revenue was 5% better (+4% year on year), within which payments increased 29% year on year, due to better activity. Barclays UK revenue was up 4% year on year.
SHARE BUYBACK
Another reason for the market’s positive response to the full year results, is the announcement of a £1 billion share buy-back. The size of the share buyback was considerably larger than the market had anticipated.
This is in marked contrast to the other UK banks, which have announced share buybacks, which were either in line or below expectations.
INVESTMENT BANKING- A CURATE’S EGG
Barclays remains unique amongst the UK banking sector in that it has retained a meaningful investment banking operation.
This has performed strongly over the last two years, however it appears that the industry has experienced a quieter start to 2022. This may be a potential area of concern given the group’s high cost base.
Shore Capital analyst Gary Greenwood believes ‘while near-term earnings momentum may not be as strong at Barclays relative to some other banks given its investment banking exposure, we believer the valuation case remains compelling’.
