The Barclays (LSE:BARC) share price experienced its biggest one-day loss since the Russian invasion of Ukraine, dropping 8% following the release of the bank’s 2022 results. Despite a 14% increase in total income from the previous year, operating expenses also rose 14%, resulting in a 14% decrease in profit before tax. This fell short of analysts’ forecasts of £7.2bn, causing the share price to plummet.
Barclays earns 70% of its revenue outside the UK, and despite a 10% appreciation of the dollar against sterling, the bank failed to meet earnings expectations. Shareholders’ equity also fell significantly from 13.1% in 2021 to 10.1% in 2022.
However, there are reasons to be optimistic, as operating expenses included litigation and conduct costs of £1.2bn, which are unlikely to be repeated. The bank’s directors also predict an increase in the net interest margin (NIM) this year, reflecting the difference between the interest earned on loans and that paid on deposits. With a predicted NIM in the UK exceeding 3.2% in 2023, the bank could generate an additional £0.7bn of income this year.
Despite this, investors must keep a close eye on bad loans due to the economic backdrop. The bank’s loans will be assessed each quarter for quality and the risk of non-payment. If the risk is deemed high, an impairment charge will be included in the accounts, but if it is low, a credit (income) will be booked.
The significant fall in the share price has led to it yielding more than the FTSE 100 average, with a final dividend for 2022 of 7.25p. If repeated in 2023, this would imply a current yield of 4.3%. The bank has expressed confidence in its performance for the coming year, but investors must weigh the risks associated with its global operations and the potential impact of bad loans.
The market reaction to the bank’s results may have been an overreaction, as the share price is now close to where it was six months ago. However, potential investors must weigh the risks and opportunities before investing.
Barclays PLC Stock Analysis:
Barclays PLC’s average analyst target price for the next 12 months is GBX 238.50, according to the forecasts of six analysts. The average analyst ratings for the stock is Strong Buy. Stock Target Advisor’s analysis of Barclays PLC’s stock is Bullish, based on 7 positive signals and 3 negative signals. The last closing price for the stock was GBX 172.60, which reflects a change of -17.12% over the past week, -8.14% over the past month, and -11.94% over the last year.
Barclays PLC, through its subsidiaries, provides various financial products and services in the United Kingdom, Europe, the Americas, Africa, the Middle East, and Asia. The company operates through Barclays UK and Barclays International divisions. It offers financial services, such as retail banking, credit cards, wholesale banking, investment banking, wealth management, and investment management services. The company also engages in securities dealing activities; and issues credit cards. The company was formerly known as Barclays Bank Limited and changed its name to Barclays PLC in January 1985. Barclays PLC was founded in 1690 and is headquartered in London, the United Kingdom.