Barclays PLC (LSE:BARC) shares got a big thumbs-down from investors after its half-year results but for some analysts they back up the view that it is "the most undervalued" of big UK banks.
Investors seemed to react to the FTSE 100-listed lender's profits being lower than expected and reporting a near-doubling in bad debt provisions in the second quarter, though profits growth was still pretty strong and the dividend was hiked and a bumper share buyback unveiled.
Bad debt provisions nearly doubled to £372mln from £200mln, taking charges for the half-year to £896mln, up from £341mln last year, though finance chief Anna Cross said the lender was comfortable about it, as it has a high proportion of customers on five-year mortgages at 51%, while many others heading for remortgage were using their savings to pay down their home loans.
UBS analyst Jason Napier said the bank had previously stood out among peers for guiding to a rise in UK net interest margin (NIM) but today "disappointingly falls in line with the pack" by forewarning of a step down in the third quarter and stable fourth, with management citing macro uncertainty.
Barclays' investment bank was a big source of a miss to revenue forecasts too, with fixed income, currency and commodities down 22%
Analyst Gary Greenwood at broker Shore Capital however said the buyback was larger than expected, guidance for return on tangible equity was reiterated and the "small downgrade" to NIM is expected to have "only a modest impact on the overall earnings expectations" given the group’s diversified business model.
With Barclays’ shares up 3% in the year to date to 164.06p at yesterday's close, trading at a trailing 0.6% times tangible net assets, Greenwood said its fair value of 315p equates to a trailing P/TNAV of circa 1.1x and implies 92% upside.
"Barclays is the most undervalued of the large UK banks, in our view," he said.
After Lloyds underwhelmed a day earlier, Zoe Gillespie, investment manager at RBC Brewin Dolphin, also felt Barclays delivered a "strong set" of results.
She noted that the consumer and credit cards side of the bank has offset the fall in revenues at the investment bank.
"The increased capital returns through a share buyback programme and dividend are signs of growing confidence from management and will be welcomed by shareholders.
"With a more diverse income stream than some of the other major UK banks, provided no conduct issues from the past re-appear, Barclays appears to be in a great position," she said.