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Posted on 26 February 2017, 8:49 PM

Barclays Bank Returns to Profit, but Earnings are Less than Forecasted

Other Insights on Related Shares: BARC.L
Related Shares: Barclays Share Price

Barclays returns to profit by posting net gains for the year ended in 2016 of £1.62 billion ($2.02 billion), which came however short of the £1.97 which had been predicted by analysts. Forth quarter pre-tax profits were £ 330 million ($410 million), up from a loss of £2.1 million which had taken place a year ago. In any case the Bank's numbers are much better than the previous year's results, which saw the bank recording a loss. Statutory group profit before tax trebled at £3.2 billion ($3.9 billion) in 2016 when compared with the £1.15 billion loss recorded in 2015 for the same measure.


The lender's financial strength also seems to have improved as its core capital ratio rose to 12.4%, ahead of analyst expectations which had put it at 11.8%. Its increased revenue and reinforced core financial health is reputed to be due to major restructuring moves which will see the bank divest itself of non-core units by June 2016, six months ahead of schedule, and severe its links with local subsidiaries in Africa, which now will operate as stand-alone units. The Bank's chief Executive Officer, Jes Staley, argued that the offloading of its African subsidiary is a step towards fulfilling the lender's new strategy of focusing on a more transatlantic strategy centred around the US and British markets, as well as on its European business arms. The latter could help Barclays cling to the financial markets of continental Europe if access is curtailed in the case of Brexit negotiations taking the wrong turn.


Following its earning call on Thursday 23rd February the stock climbed 2% in early trading, to then fall by 4.4%, before stabilizing at 225.9p by market close, meaning a loss of 3% when compared to the previous position. Barclays return on equity increased to 3.6%, from a negative value of -0.7% recorded in 2015; in the meantime, its cost to income ratio decreased from 84% to 76%. The lender’s returns trail its cost of equity, estimated by analysts to be 10%. There are some concerns regarding the bank's exposure to escalating pension fund costs which will leave their mark on the bank's capital. Earnings per share are only 0.06 GBP, while the P/E ratio is 36.90 and the year to date return is a measly 1.10%. On the income front, the dividend indicated gross yield is 1.33%.


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