Brexit is the biggest elephant in the room
At first blush, it seems like there is still some firepower left. The equity trading business of the firm is still sailing the ship and the number is up 35% which was well ahead of average estimates (28%). Remember this was one of the worst-performing areas for the industry last year. The force behind this has been the strength in the equity financing. The fixed income business for the bank also printed encouraging numbers today, the business climbed 10% beating analyst forecast.
The question is if Edward Bramson, a major shareholder activist, will still go after his agenda and call for downsizing of the bank operation. The CEO is determined to take on the fight because he is a true believer that the European lender can excel and it can satisfy the retail and wholesale market.
As an investor, you want to see the bank hiking the dividend payment and stock buyback program but listening to the CEO, we do not feel that the bank is there yet. This is despite the fact that the business has generated a double-digit return.
Overall, Barclay’s performance as compared to its peer has been much better or the Stoxx 600 banks index or even the FTSE 350 banks.
Of course, Brexit is the biggest elephant in the room and the concern is if the bank can occupy any extra market share given that the sentiment over in the U.K is somewhat fragile. Banks such as Metro bank, are aggressively taking the market share by offering better services for mortgages and savings. Given that the Bank of England is on the path of hiking the interest rate, the mortgage business becomes even more sensitive to this development.
