The year started oddly, when Barclays was forced to release various key numbers from its final results early to dampen press speculation. Things became more sinister in June, when allegations of fraud and deceptive practices were made by the New York Attorney General about Barclays dark pool trading venue.
The foreign exchange rigging scandal came next, and for reasons that arent yet clear, Barclays refused the settlement deal that was accepted by other UK banks in November, in order to negotiate a different deal for itself. This process is still ongoing, and has prolonged the uncertainty surrounding this scandal.
What about results?
Barclays results havent been too bad this year, and suggest to me that Barclays is making steady progress with its Transform plan.
Profits at Barclays personal and corporate banking, Barclaycard and non-core divisions have all risen, while bad debt charges have fallen and operating expenses are lower.
Barclays financial strength has also improved: the banks Common Equity Tier 1 Ratio (CET1) rose to 10.2% during the third quarter, and Barclays outperformed Royal Bank of Scotland Group and Lloyds Banking Group in this weeks Bank of England stress tests.
The fly in the ointment has been Barclays investment bank, which continues to perform poorly, dragging down the banks overall returns. However, I believe that the arrival of new chairman John McFarlane in 2015 could be the trigger for change in Barclays investment division: Mr McFarlane didnt hesitate to make sweeping changes following his arrival at Aviva, and I expect the same kind of decisive action at Barclays.
Barclays net tangible asset value per share rose to 287p in the third quarter, meaning that the banks shares currently trade at a 20% discount to their tangible book value.
The banks shares trade on a 2015 forecast P/E of just 8.6, and offer a 2015 prospective yield of 4.2%. By any measure of value, Barclays looks cheap. Interestingly, despite its rising dividend, Barclays trades on a lower P/E than non-dividend payers Lloyds and RBS.
In my view, the arrival of new chairman John McFarlane in spring 2015 should be the final element needed to complete the banks turnaround and restore investor confidence.
The banks undemanding valuation reduces the risk of holding the shares, and I believe Barclays offers compelling value, and remains a strong buy.
However, there’s no doubt that questions remain over how well banks’ balance sheets would cope with another financial crisis.
Perhaps for this reason, the Motley Fool’s top analysts did not select a single banking share for their latest wealth report, “5 Shares To Retire On“.
The five companies which were chosen all have a solid record of dividend growth and three of them appear ready to benefit from the recent fall in oil prices.
This exclusive report is FREE and carries no obligation.
To receive your copy today, simply click here now.
Get FREE Issues of The Motley Fool Collective
Get straightforward advice on whats really happening with the stock markets, direct to your inbox. Help yourself with our FREE email newsletter designed to help you protect and grow your portfolio wealth.