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Why Barclays will bounce back
Barclays 2013 profits were down by just over a third. Adjusted profit before tax was down 32% to £5,167m, partly due to costs of the internal Transform programme as well as the investment arm being hit by around 3 Billion GBP in litigation costs, following a number of scandals including Libor. Yet bonuses were higher and the CEO Antony Jenkins is upbeat saying “...we are in a significantly better position and I feel confident about our prospects.”.
However the share price was down initially by around two percent as the markets reacted to the new numbers. Saxo Bank's Head of Equity Strategy, Peter Garnry, says that was just a minor correction and is positive on Barclays stock.
Last year, Barclays was pushed by the Bank of England into a rights issue to plug an enormous hole in its balance sheet. Peter Garnry says that Barclays now has a leverage ratio of 3 percent and a Tier One capital ratio of 9.3 percent. He believes the balance sheet problem has now been solved. In the CEO's statement the rights issue is credited for this improved leverage: "Supported by the £5.8bn Rights Issue, we reached a CRD IV fully loaded CET1 ratio of 9.3% at the end of 2013. We remain on track to meet our target of 10.5% during 2015"
Barclays says it will cut around 12,000 jobs worldwide this year, 7,000 of those in the UK. However, Peter Garnry says that the bank may not be forced to lay off that many employees if 2014 turns out to be as good as the CEO predicts.
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