25 April 2024
If you are covering Barclays Q1 2024 results, please see comment from Will Howlett, financials analyst at Quilter Cheviot:
“Barclays has kicked off the year with a promising start, adhering to the financial roadmap outlined at its full year 2023 results.
“The bank’s commitment to capping the investment bank’s contribution to 50% of risk weighted assets (RWA) and the pledge to return at least £10 billion to shareholders over the next three years – representing over 35% of the market cap – is a testament to its strategic focus and shareholder-friendly approach.
“The reiteration of profitability targets, aiming for a return on tangible equity (RoTE) of over 10% in 2024 and over 12% in 2026, reflects a consistency in Barclays’ ambitions despite previous setbacks.
“The market has responded positively to these targets, reinforcing the long-held belief that a bank with a sustainable RoTE above 10% is deserving of a valuation closer to its tangible book value. Currently trading at approximately 0.6 times, with a tangible book value (TBV) growing 11% year-on-year to 335p, Barclays is on track to realign its market perception.
“The first quarter has seen a modest outperformance, with profit before tax (PBT) down 12% year-on-year but still 4% ahead of consensus. A RoTE of 12.3% for the quarter is commendable, driven largely by the UK division’s net interest margin improvement. However, the investment bank’s performance was mixed, with an 8% decline in markets revenue, a significant 21% drop in fixed income, counterbalanced by a robust 25% increase in equities. Loan losses remained controlled at 51 basis points, sitting comfortably at the lower end of the guided 50-60 basis points range.
“On the capital front, the Common Equity Tier 1 (CET1) ratio saw a slight decrease of 30 basis points to 13.5%, aligning with the target range of 13-14%. This was a result of organic profit gains being offset by dividends, buybacks, an active first quarter for the investment bank, and other factors.
“With a solid start to the year, Barclays is poised to reshape its valuation narrative and deliver on its promises to shareholders.”
