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barclays (LSE: BARC) released full-year results on Wednesday and investors responded poorly. The share price fell immediately, losing 10% at noon.
The share price had been gaining ground since October, before the FTSE 100The overall uptrend of . But the latest setback now puts them at a loss of 14% over the last 12 months.
The disappointment appears to be partly due to a 19% drop in attributable profit to £5bn. The last quarter also saw a drop, of 4%. Interest rate hikes should have helped boost lending in the banking sector. But Barclays made a disappointingly small profit.
Returns
We also saw a decline in return on tangible equity (RoTE), from 13.1% a year earlier to 10.4%. Perhaps more worryingly, the fourth quarter number was lower at 8.9% compared to 9% a year ago.
I don’t really see a surprising drop, considering the economic pressures we faced in the second half of the year. But it may be a key measure for banks, and I find the size of the decline disappointing.
Barclays’ year was marred by a business error and the resulting financial penalties. He oversold some financial products in the US to the tune of $17.7 billion more than he had authority for. That led to a $360m (£298m) fine and the bank had to set aside £450m to compensate investors.
The hit seems easily manageable, compared to an annual profit of £5bn. But it is another shameful example in a series of regulatory failures.
dividends
On the upside, the bank increased its 2022 dividend by 21%, to 7.25 pence per share. However, share buybacks were down by a third compared to 2021. And that means the total equivalent payment dropped from 15 pence per share to 13.4 pence.
I still think the dividend increase is a healthy sign. We should only view buybacks as exceptional returns, and should not expect them to continue every year.
These results may not sound too good, but they may not be too far off expectations. So looking ahead, is the stock really worth a 10% drop in response?
panorama
Markets are sure to be put off by the board’s 2023 outlook. The key point for me is Barclay’s RoTE expectation. It has an objective ofgreater than 10%” in 2023. But we just saw a figure of 10.4% for 2022, down from 13.1% in 2021. Yes, we are headed for a recession this year. But the Bank of England thinks it won’t be as bad as previously feared. In that context, I find the RoTE goal uninspiring.
So what is my take on Barclays now? Being short-term bearish is understandable, and I think that we could have a volatile year ahead.
But it’s easy to lose sight of the long-term picture. Forecasts put Barclays shares at price-earnings (P/E) multiples of not much more than five. I’d say that more than makes up for a likely lackluster 2023.
And I still see Barclays as a potential buy for long-term income investors doing their research.
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