Barclays’ stock (NYSE: BCS) has lost 1% YTD, as compared to the 10% rise in the S&P500 over the same period. Further, it is currently trading at $8 per share, which is 33% below its fair value of $12 – Trefis’ estimate for Barclays’ valuation. The bank outperformed the consensus estimates of net profit in the first quarter of 2023. It reported total revenues of $8.79 billion – up 1% y-o-y, driven by a 4% growth in Barclays UK revenues due to higher net interest income. However, it was partially offset by a 2% drop in the Barclays International segment. Notably, the Barclays International segment posted positive growth on a currency-neutral basis. On the cost front, the provisions for credit losses witnessed an unfavorable build-up in the quarter, offset by lower operating expenses as a % of revenues. Overall, the firm posted a profit before tax of $3.1 billion – up 2% y-o-y (Note – Barclays originally reports in GBP (Pound), the same has been converted to USD for ease of comparison).
The bank’s top line grew 2% y-o-y to $30.9 billion in FY 2022. It was mainly because of growth in the consumer, cards & payments segment. Further, the total net interest income in the year increased by 18% y-o-y due to improvement in the interest rates. On the flip side, the corporate & investment bank revenues were down due to lower corporate lending and investment banking income. In addition, the litigation and conduct expenses increased in the year, negatively impacting the bottom line – the adjusted net income was reduced by 27% y-o-y to $6.2 billion.
Moving forward, we expect the net interest income to drive the company’s growth in Q2. Barclays’ revenues are estimated to touch $33.28 billion in FY2023. Additionally, BCS’s adjusted net income margin is likely to remain around 20%, leading to an adjusted net income of $6.6 billion and an annual GAAP EPS of $1.65. This coupled with a P/E multiple of 7x will lead to a valuation of $12.
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