With full-year results due tomorrow, Barclays' share price has continued to fluctuate over the past year. With the chaos of PPI fading, and the uncertainty of Brexit approaching its conclusion, how will the share price fare?
By the numbers
Barclays posted solid third-quarter numbers in October, with Jes Staley, Group CEO saying: “For the year to September our Group return on total equity stands at 9.7%, including a 10.2% return in the third quarter. Profit before tax was just under £5bn, excluding litigation and conduct, and earnings per share were 19.7p for the nine months”. The bank also outperformed on trading, as revenue from fixed income, currencies and commodities (FICC) increased by 19% – good numbers by European standards.
US banks have been largely doing well when it comes to FICC, though European banks have been underperforming in comparison. Analysts expect that Barclays will report a pre-tax profit around £6bn, which would be higher than the £5.7bn from the same period last year. This would represents an increase of 5.2%
‘Have you been mis-sold PPI?’
The payment protection insurance (PPI) scandal has continued to echo for the past decade, but it will finally, soon be silenced. PPI, in case you needed reminding, was originally designed to cover loan or credit card payments if you were unable to work, but numerous major banks had mis-sold this plan without explaining what it fully entailed. Major UK banks, including Lloyds RBS, and Barclays, have all racked up huge expenses in repayment to their customers, with the total compensation exceeding £37bn.
Barclays, one of the biggest banks to feel the PPI hit, confirmed that it set aside £1.4bn in the last quarter, but there was a muted reaction to the news as the bank cautioned about a provision of roughly that size in September. The PPI deadline passed in August last year, making this annual report the last in which PPI will influence the results. Jes Staley said, “Despite the impact to profitability of the £1.4bn PPI provision, our CET1 (common equity tier 1) ratio of 13.4% continues to be within our target, which is revised to c.13.5%”. Years passed with PPI compensation claims ringing from TVs and radios, but with the deadline over, we should have heard the last of PPI – a fact every bank will be happy to hear.
Barclays’ share price pivot
Barclays' share price has flown through peaks and valleys over the past seven months. Last August, the bank saw its share price fall 11% from 155.9p to 136.6p, as worries concerning Brexit and the pre-deadline surge in PPI compensation influenced the drop. The bank’s share price got a boost in December however, on the back of the Conservatives’ election victory, reaching 192.4p, as traders took the view that the avoidance of a Labour government should remove some of the uncertainty surrounding investment in the country
Barclays' share price spike soon dissolved though, due to talk of a potential interest-rate cut from the Bank of England, and continued uncertainty around Brexit negotiations. As of 11 February, the share price sits at a steady 179p, though with a clearer picture of the Brexit situation, and the end of PPI claims, the full-year results could provide a further boost.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
