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Barclays’ stock (NYSE: BCS) has gained 38% YTD, as compared to the 11% rise in the S&P500 over the same period. In comparison, Barclays’ peer Deutsche Bank (NYSE: DB) has seen its stock rise 24% over the same period. Overall, BCS is currently trading just below $11 per share, which is 5% below its fair value of around $11.50– Trefis’ estimate for Barclays’ valuation.

Amid the current financial backdrop, BCS stock has shown strong gains of 40% from levels of $8 in early January 2021 to around $11 now, vs. a similar change for the S&P 500 over this roughly 3-year period. However, the increase in BCS stock has been far from consistent. Returns for the stock were 30% in 2021, -25% in 2022, and 1% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that BCS underperformed the S&P in 2022 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Financials sector including JPM, V, and MA, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could BCS face a similar situation as it did in 2022 and 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

The bank surpassed the consensus estimates in the first quarter of 2024. It reported total revenues of $8.81 billion – at par with the year-ago figure. It was primarily driven by a 3% drop in the Barclays UK and a similar decrease in the investment bank (includes investment banking and sales & trading) business. However, the negative impact was almost offset by growth in private bank & wealth management and US consumer bank divisions. On the cost front, total expenses as a % of revenues witnessed an unfavorable increase in the quarter. Overall, the profit after tax declined by 7% y-o-y to $2.3 billion (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 $31.56 billion in FY 2023. It was mainly because of a 5% growth in Barclays UK and an 18% increase in consumer, cards & payments divisions, partially offset by a 6% decline in corporate & investment bank units. On the expense side, total expenses as a % of revenues increased from 70% to 72% in the year. Further, provisions for credit losses rose by 55% to $2.3 billion. Altogether, profit before tax decreased 6% y-o-y to $8.15 billion.

Moving forward, we estimate Barclays’ revenues to touch $32.08 billion in FY2024. Additionally, BCS’s annual GAAP EPS is likely to remain around $1.57. This coupled with a P/E multiple of just above 7x will lead to a valuation of $11.50.

[1] Returns as of 5/24/2024
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.