There is something to love and hate in almost every stock. But today, I’m in a fratchy mood, so here are five things I hate about Barclays (LSE: BARC) (NYSE: BCS.US).
Frankly, what’s to like?
It’s so easy to hate Barclays; in fact, it’s virtually a national sport. That’s hardly surprising, following PPI and interest-rate swap mis-selling, and the Libor and energy price-fixing scandals. Barclays has just been named the worst bank for honesty and customer service. It says it is going through a major cultural change, but that will come at a price. Its recent text alert service, which warns customers they are going into the red, has cost £1.5 million in lost fees already. Can it become a good bank, and still be good at making money? It has a long way to go.
The nasty surprises keep on coming
Barclays faces a £50 million fine from the Financial Conduct Authority (FCA) over the $4.6 billion injection of Qatari capital during the financial crisis in 2008. More fines could follow, with the Serious Fraud Office, US Department of Justice and US Securities and Exchange Commission still investigating the controversial fundraising. Barclays is also fighting a $435 million US energy fine. And it has just admitted to charging incorrect interest on personal loans to 300,000 customers over a five-year period, in a case that could cost it £100 million. Whatever next?
It destroys investment metrics
Barclays isn’t just too big to fail, it is too big to judge accurately. An organisation this sprawling defies analysis. Its accounts defeat me. As for working out its intrinsic value, I can only guess. Any investment is a stab in the dark.
It lost its fight with the capital Taliban
Every time opposition politicians issue a new spending pledge, a banking levy is their preferred method of funding it. Worse, regulators are constantly raising capital demands. Barclays was recently left with a £13 billion capital shortfall after the Prudential Regulatory Authority brought forward its demands by several years. Could it move the goalposts again?
Because you still have to hold it
Yes, Barclays is a big, bad bank. But investors who don’t like getting their hands dirty have missed out on 65% share price growth over the last two years. Forecast earnings per share growth is a punchy 22% in 2014. The dividend yields a lowly 2.2%, but that is forecast to hit 4.2% by the end of next year. The economy appears to be recovering, and Barclays will share in that. You may hate it, but in my opinion you still have to own it.