Barclays' results come in better than expected. But are the shares a buy?
So Barclays' (LSE: BARC) performance has slam-dunked the best estimates, the bosses have foregone their bonuses, things are gradually looking up, bad debt is bad -- but not as bad as may have been expected and the shares are a shoo-in to gradually return to their previous pre-crunch levels and, as such, are a sensible long-term hold.
This seems to be the snap judgement being made today by many private investors, and it's a valid one. But to what extent has it all already happened when you look at Barclays' share price -- which went as low as 61.4p less than a year ago? And is there better value to be had elsewhere in the banking sector for those with more of an appetite for risk?
Happy days are here again
On the share price front anyway, happy days are here again. The shares opened 9% up before falling back a little on short-term profit-taking. The bank told us that 2010 has started strongly, with profit before tax "well ahead of first half and full year 2009 run rates". It also said its "planning assumption is for a moderate decline in impairment".
Although impairment charges for 2009 were a hefty £8bn, they were still well below last year's gloomiest estimates -- and the bank expects them to fall going forward.
Meanwhile, Barclays' core tier 1 ratio (which provides protection against unexpected losses) stood at 10% at the end of the year, up from 5.6% a year ago (the higher it is, the safer the bank is deemed to be).
The waiving of bonuses by the Chairman and CEO looks like an obvious political move, laudable though it may be. And until the dust settles on bonuses, they can't really win on this front.
The bottom line
As far as the bottom line is concerned, full-year profits increased by 92% to £11.6bn. Ignoring the sale of the bank's BGI fund management arm, profits came in at £5.3bn.
As you might expect, 2009 was a good year for Barclays Capital which contributed almost £2.5bn in profits. Things weren't quite so rosy on the UK retail side, however, where pre tax profits fell 55% to £612m as economic conditions remained challenging.
Income seekers will have to be patient. Barclays declared a final dividend of 1.5p giving a total of 2.5p a share for the year. Though slightly disappointing, the bank says its policy here will be "conservative but progressive"; make of that what you will!
Quite where the analysts' forecasts will settle after today's results is anyone's guess at the moment. But on a longer term view, the old bank could be standing on an unfeasibly low rating.
The rebound
It's part of human nature to go further in the opposite direction following a calamity -- before repeating the same mistakes once it's all forgotten, of course.
On this score, I would expect the retail side of the business to gradually contribute more to the bottom line. But if this does happen, it may also mean that the banks with more at stake here could do better on the rebound in the years to come – namely, Lloyds Banking Group (LSE: LLOY) and Royal Bank of Scotland (LSE: RBS).
Remember, though, that Barclays didn't take the King's shilling last year. Instead of going cap-in-hand to the taxpayer, the bank went to the Middle East for its handout.
Perhaps ironically, the lack of a public stake is comforting for safety-minded investors. And if you subscribe to the view that investing is more art than science, particularly over the longer term investment horizon favoured by most Foolish investors, Barclays looks a solid bet for a combination of future income and capital growth.
More from David Holding:
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> David holds shares in Lloyds Banking Group and Barclays.
