The Motley Fool

Is the share price slump at Barclays plc finally set to end?

Looking back on the UK-focused FTSE 100 banks since the financial crisis, I see some irony in that Barclays (LSE: BARC), the one that didn’t need a government bailout, has been the market’s least favourite of late.

Over the past 12 months, shares in Lloyds Banking Group have dipped by a modest 3%, and Royal Bank of Scotland has posted a 22% gain. But Barclays shareholders are sitting on a 9% loss.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Looking back five years shows a similar picture. RBS shares are down 17% (as its earnings and dividend recovery have really only just got properly under way), while Lloyds with its earlier return to health has seen a 35% share price gain. Barclays? Down 23% over five years.

To be fair, since the peak in 2007 just before the crisis exploded, Barclays shares have actually lost the least with a fall of 69%. Lloyds shares are still down 82%, and RBS has lost 97%.

Misconduct

Barclays’ big problem has been regulatory misconduct, and it’s faced significant losses from fines and related costs. For the 2017 year just ended, the bank recorded £1.2bn in litigation and conduct costs, including £0.7bn relating to the long-running PPI scandal.

Ten years on, the Serious Fraud Office has raised charges related to the deal that saved Barclays from going cap-in-hand to the taxpayer in 2008. The bank secured a £12bn loan from Qatar to keep it afloat, but the SFO alleges that a £2.3bn loan from Barclays to Qatar Holdings was an illegal sweetener.

So much focus and cash drawn away from the straightforward business of rebuilding a profitable bank has led to a slump in EPS, which dropped from 15.3p in 2013 to just 3.5p for 2017 — earnings had previously been growing strongly in the early post-crash recovery years.

A resulting key problem has been the failure to get the dividend back to any sort of reliable growth, as the two bailed-out rivals have achieved.

Dividends at Lloyds were reinstated in 2014 and rose to yield 4.5% last year, and forecasts suggest close to 6% this year. Even laggard RBS is finally set to rejoin the dividend club in 2018 with a yield of 3%, and there’s better than 5% indicated for 2019.

Dividend

Barclays’ dividend, however, was slashed for a second time in 2016 to yield just 1.3%, after having started to pick up.

But there’s good news on the dividend front, after the bank confirmed the 3p per share expected for 2017 and told us it intends to more than double that to 6.5p per share in 2018.

Chief executive James E Staley, while recognising the presence of some remaining legacy issues, added: “I am confident in the capacity of this business to generate excess capital going forward, and it remains our intention over time to return a greater proportion of that excess capital to shareholders through dividends.

The 2018 yield would be around 3% at today’s share price, which is still some way behind the 5.7% on offer from Lloyds (which remains my favourite of the big banks), but it represents a significant milestone.

On a forward P/E of around 10, I don’t see Barclays as the best value in the sector right now, and the SFO thing is a big worry. But I’m cautiously optimistic that the modest share price recovery since early February will continue.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Alan Oscroft owns shares in Lloyds Banking Group. The Motley Fool UK has recommended Barclays and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.