VALUATION HIGHLIGHTS

1. Barclays International (Barclaycard, Advisory & Underwriting, Sales & Trading, Transaction Banking) constitutes 69% of the Trefis price estimate for Barclays's stock.
2. Barclays UK constitutes 30% of the Trefis price estimate for Barclays's stock.

Latest Earnings Q3'24

Barclays posted total revenues of £6.5 billion ($8.4 billion) for Q3, while net profits stood at £1.6 billion (about $2 billion). The company is seeing net interest income expansion in the U.K. business, with cost management also improving.

The top-line increased 5% y-o-y to £23.5 billion in FY2023. It was driven by a 5% rise in the Barclays UK division and an 18% growth in the consumer, cards & payments division, partially offset by a 6% drop in the corporate & investment bank unit.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Barclays' value that present opportunities for upside or downside to the current Trefis price estimate for Barclays:

Sales & Trading

• Yield on Fixed-Income Trading Securities: Barclays' yield on fixed-income securities has averaged around 6% over the period 2009-15, with the figure swinging considerably from one year to the next as market conditions change. The yield reached a high of 8.3% in 2016 before going down to 5.4% at the end of 2021, as the revenues declined, but debt trading securities remained upbeat. The figure was around 8.3% in 2022 and 5.5% in 2023. While we forecast the yield to decrease to 4.5% by the end of our forecast period, if it remains around the current level over the Trefis forecast period, it would mean an upside of 10% to our price estimate.
• Investment Banking Operating Margin: Barclays' investment banking operations division's operating margin averaged around 25% between 2005-12 - with the figure being affected adversely in 2008 due to the global economic downturn. The figure was substantially lower due to significant legal and restructuring costs in 2013 and 2014. Since then, the figure has improved and was around 32.5% over 2022-23. We anticipate the long-term margins to decline to around 30% over the Trefis forecast period.

For additional details, select a driver above or select a division from the interactive Trefis split for Barclays at the top of the page.

BUSINESS SUMMARY

Barclays is a London-based global money center bank that provides consumers, corporations, governments, and institutions with a broad range of financial products and services, including consumer banking, credit cards, corporate and investment banking, securities brokerage, and wealth management. It is the leader in debt issuance in Europe. It has a strong presence in the U.K. retail and commercial banking industries. Over recent years it has refocused most of its efforts on providing diversified banking services in the U.K., the U.S., Germany, and southern Europe.

SOURCES OF VALUE

Barclays International is Barclays' most valuable division

At the end of 2022, Barclays International reported around $165 billion in loans and close to $356 billion in deposits for its Barclays International division. The International division generated around $6.1 billion in interest revenues for the banking giant. Taken together with related fees and trading incomes, the division brought in approximately 58% of Barclays' total revenues.

KEY TRENDS

Increasing demand for investment banking services in emerging markets

With the GDP and per capita income of emerging markets growing rapidly, there is an increasing demand for capital from companies in these markets to support the growing purchasing power of the people. Also, with the integration of these markets with the global economy, there is a shifting trend in these countries from family-run businesses to corporations. As a result of these factors, an increasing number of companies in these markets are going public, leading to a growing demand for equity underwriting services. Additionally, consolidation across different sectors is driving demand for M&A advisory services.

Volcker Rule restrictions on proprietary trading

The Volcker Rule restricts banks from making certain kinds of speculative investments if they are not on behalf of their customers. Barclays's proprietary trading desks have accounted for a significant percentage of its earnings in the pre-2008 era. The Volcker Rule is likely to result in a reduction in total trading revenues from the U.S. for the bank.