Barclays’ share price performance has flagged this year. Yet analysts at Jefferies not only believe that the bank is poised to reward shareholders but have upped their already bullish price target on the UK lender. Barclays is also expanding its Asian institutional business, which could provide more resilience to the stock.
- Barclays to hand investors £10bn by 2025, according to Jefferies.
- Bank boosts lending to hedge funds in Asia.
- Dutch housing association seeks court showdown over derivative losses.
Barclays’ [BARC.L] share price has flagged this year. Year-to-date Barclays’ share price has dropped over 8%, closing Friday, 23 June, at 145.22p. This sees the bank lagging Lloyds’[LLOY.L] 5% decline and HSBC’s [HSBA.L] 22% gain.
Shareholders have made their feelings known about the Barclays share price. At a testy AGM in May, Barclays chair Nigel Higgins defended the bank’s underwhelming share price performance from disgruntled shareholders, saying that a policy of increasing capital returns and avoiding costly mistakes would improve performance.
Now the bank’s bosses have hired a top strategic firm to review how to turn around the stock’s fortunes, which has led one analyst to predict the bank is poised to reward shareholders.
Barclays plans £10bn in giveaways to boost share price
Barclays has hired Boston Consulting Group to conduct a strategy review on how to turn around the underwhelming share price, according to analysts at Jefferies [JEF]. Yet the analysts predict that buybacks present the best option to boost the stock and that the bank could dole out more than £10bn to shareholders in the form of dividends and repurchases by the end of 2025.
“Barclays management seem compelled to want to address weakness in the share price. The best way to do that is through large-scale buybacks executed below book value,” said Jefferies.
Jefferies upped its price target on Barclays this month from an already bullish 300p to 320p, more than double Friday’s close. More widely, Barclays’ share price has a 240p 12-month median target from analysts, suggesting a 65.3% upside on Friday’s close.
Yet, it hasn’t all been doom and gloom when it comes to the Barclays share price. Performance has improved over the past three months, with the stock up 8.4%. Boosting shareholder sentiment were well-received first quarter results, published 27 April. Pre-tax profit jumped 16% to £2.6bn for the first three months of the year. Group income rose 11% to £7.2bn.
However, impairment charges rose from £141m to £524m due to its US cards business.
Despite the bump in profits, Barclays kept its full-year guidance unchanged with the bank targeting a 10% return on tangible equity for the full year.
Barclays expands its Asia business
Barclays is upping its trade financing business in Asia to boost revenue, reports Bloomberg. Revenue from Barclays’ financing business has more than doubled in the region over the past three years. Demand is coming from hedge funds and private clients looking for cross-border structured products.
Barclays had previously reduced its presence in the Asian market, having closed seven offices in the region in 2016. Now the British lender is increasing its presence, catering to institutional and corporate customers in Asia. The bank has invested in Australia, India and Taiwan, where it set up a subsidiary in July last year.
Becoming less reliant on its trading business or the UK retail market could help the Barclays share price. Rival HSBC has benefited from its focus on Asia, where just under half of its customer accounts are based.
Dutch landlord in court date with Barclays
One drag on profits could be a case being brought by a Dutch landlord against Barclays that could go to trial at the UK High Court next year.
The housing association, known as Vestia at the time, was on the brink of collapse in 2012 after interest rate derivative contracts it bought turned sour. The landlord alleges that Barclays paid €1.56m in commissions to intermediate Fifa Finance, which then diverted half the funds back to Vestia treasurer Marcel de Vries.
The court documents claim that the transactions “unjustly enriched” the bank and Vestia, according to the Financial Times. The documents add that the transactions were void because “Barclays had no sufficient reason to believe that Fifa was in fact providing services to Vestiawhich justified the sums it paid”. Vestia is looking for €279m in damages.