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 Reports and Commentary from the Investment World

Reports and commentaries are posted here on a regular basis.




Barclays. (BARC:LSE)

The English banking group, Barclays,is ranked third amongst the great British banking institutions, just behind HSBC (formerly Midland Bank) and the Royal Bank of Scotland. It is also strongly represented at international level, established in about sixty countries, with 2,100 branches. Its activities are centered around credit cards,property loans, factoring and leasing.
The group's main activities concentrate on five sectors:Personal Finance Services focuses on life assurance, savings, retirement pensions and property loans for private individuals.
Business Banking Services handles services for English or other banking institutions.
Online Banking Services offers a range of banking services available over the Internet.
Investment Banking handles the bank's investment and trading activities in capital markets across the world.
Finally, Barclays Global Investors provides asset management for institutional investors.

When markets drop, as they have in the last month, and shares across the board get hit, we always start searching first to 'industry leaders'.
These are the strong, proven businesses where a solid competitive advantage is more likely to see them through any down turn and period of general uncertainty.
Barclays is such a business.
The shares languish on a P/E ratios of below 10 and their forecast dividend is approaching 5%.
These ratings compare favourably to their peer group, who have market average P/E of 13-14 and yield of about 3.4%.
The other attraction is that Barclays are today trading at prices first achieved in 2002!

The low P/E seems to have arisen because the market feels current levels of profitability are unsustainable.
Margin erosion, bad debts and/or general economic worries  seem to be playing their part here.
Nevertheless, the sector's dividend record appears reliable with, Barclays raising its dividend payouts by 60% since 2000. In fact, the early Nineties was the last time Barclays cut its dividend.

The recent trading updates have generally disclosed 'performances in line with expectations' and the City agrees that 2006 should witness further progress throughout the Banking sector.
Following solid dividend improvements during 2005, it is reassuring to note projected payout growth for 2006 and 2007 remains good. Dividend improvements of around 10% are expected at Barclays.
Barclays now aims to accelerate a recovery in its UK retail banking business by rebranding its Woolwich branches as Barclays and closing three back office sites and potentially 200 branches.
Also in its favour is diversification. Barclays has a variety of operations in the UK and overseas, and
serves both commercial and retail customers as well. That's in contrast to, say, Northern Rock and Bradford & Bingley, where a domestic focus on retail mortgages could leave them particularly vulnerable should a stagnating housing market ever go into reverse.

Barclays, reported today (28th June) that Woolwich will become Barclays' UK banking mortgage product brand, moving in-store in all branches.
It said Woolwich and Barclays branches that are within 300 metres of each other, representing about 10% of  the network, will be consolidated into a single premise. The plan was the first major strategic move by Deanna Oppenheimer, who was appointed head of UK retail banking  in December after joining from U.S. bank Washington Mutual last September. She has been tasked with reviving Barclays' core UK retail bank business, where it has lost mortgage market share after struggling to integrate Woolwich, the former building society bought for 5.4 billion pounds ($9.8 billion) in 2000.

"There's been a significant management focus on the performance of the UK bank over the recent past and good  foundations have been built in 2004 and 2005," Oppenheimer said on a conference call.
"We're reinvesting gains from the property portfolio to accelerate change in UK retail ... we're going to focus on both customer service and the operational efficiency," she said. 

All in all, good track records, decent forecasts and greater share-price value puts Barclays ahead of the pack in our view. The streamlining of its branch network and the new appointment of Deanna Oppenheimer all bode well for a staged recovery in Barclays position as a major banking player.

Buy Barclays (BARC:LSE) up to 620.00p. Enjoy a 5% dividend whilst awaiting a share price rise. 


Disclaimer: All the information above is provided as a service for individuals and institutions. It should in no way be construed as a recommendation as an investment. Investment decisions should be based on the risk tolerance and planning horizon of the investor. Market participants must understand that past performance is also not a guarantee or predictor of future results.