Barclays share price plunges as 2022 profits and buybacks fall

Barclays misses the mark in Q4 2022

Barclays said pretax profit fell to £1.3 billion in the fourth quarter of 2022, falling just short of the £1.4 billion pencilled-in by analysts. However, the annual drop in pretax profit of 16% to £7.0 billion was in-line with expectations.

Revenue also increased less than anticipated in the final three months of the year.

Trading in fixed-income was strong with revenue rising 79% to £976 million. This was a slight disappointment considering markets had hoped for an 82% rise, although Barclays significantly outperformed its global rivals on this front. Equities trading was poor after Barclays reported a surprise 12% drop in revenue when analysts had expected growth.

Banking fees also halved compared to last year. The drop was expected as the amount being made from advising firms of new deals, listings and fundraises has collapsed in the uncertain economic environment, but it was a sharper fall in fees than the 45% drop pencilled-in by analysts.

However, the miss at the topline was countered by the absence of any costs being booked for the over-issuance saga, which saw Barclays accidentally issue billions of dollars of more structured and exchange-traded notes last year than it had registered, that has dragged down results in previous periods. That should be welcomed by investors that will now believe Barclays can put this debacle behind it even if there are some civil suits to worry about. CEO CS Venkatakrishnan said he is ‘determined’ that the over-issuance error will not happen again.

Barclays ups dividend and launches buyback

Barclays raised its total dividend for 2022 to 7.25p per share from the 6.0p payout we saw in 2021. That will be supplemented by a new £500 billion share buyback, which means Barclays has announced £1.0 billion worth of repurchases for 2022 – however, that may struggle to get investors excited considering the bank returned £1.5 billion the year before.

The bank said it is aiming to deliver a return on tangible equity (RoTE) of over 10% in 2023, having come in at 10.4% in 2022. Some analysts flagged this morning that this marks an acceleration considering this was previously treated as a medium-term goal.

It said its ‘capital distribution policy incorporates a progressive ordinary dividend, supplemented with buybacks as appropriate’.

Barclays cost profile to improve in 2023

Barclays reported a cost to income ratio of 69% in the fourth quarter, with the metric coming in at 67% over the full year. The bank said it is expecting this to drop to the ‘low 60s’ in 2023 and continuing to push for below 60% over the medium-term.

That will be welcomed, but Barclays said its UK net interest margin should be ‘greater than 3.2%’ this year, which may be disappointing considering analysts had pencilled-in 3.28%.

Where next for the Barclays share price?

The Barclays share price is down over 8% this morning in wake of the results at 172.28p. This has caused the stock to fall below the 174.40p level of support-turned-resistance that was in play throughout 2021 and 2022.

That has brought the 50-day moving average back into play for the first time since the start of the year. This now must hold to avoid opening the door to the other moving averages converging around 161p to 162p, in-line with the level of resistance that can be traced back to last June.

That has unwound the recent rally that sent Barclays shares to their highest level in over a year last week. The stock would need to recapture 174.40p before it can once again target that one-year high of 190p. The 21 brokers that cover Barclays have an average target price of 247.88p, implying there is almost 33% potential upside from current levels.

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