To quote my Motley Fool colleague Royston Wild, “it’s impossible to discuss the fortunes of the FTSE 100’s UK-focused banks without mentioning Brexit…“
The banks could be devastated if we leave the EU without a deal, and I reckon Barclays (LSE: BARC) could potentially be the worst hit. And just a few short weeks ago it looked like that was increasingly likely to happen.
But such a lot has happened since then, with the EU having offered a longer and flexible delay. It’s almost as if the rest of Europe is trying to talk Theresa May down from a cliff of her own making — the EU clearly isn’t bothered by rigid timetables.
And the government has even been talking to the Labour opposition to try to make progress — you know, almost as if they’re supposed to be doing the best for everyone, not just for Leave voters.
Board challenge
What of Barclays itself? First-quarter results are due on 25 April, with the bank’s annual general meeting scheduled for a week later on 2 May — and it’s the AGM where we could be seeing the fireworks.
Investor Edward Bramson has build up a 5.5% stake in Barclays. And with a focus on moving the bank away from its investment banking business, he’s angling for a seat on the board. I suspect he’d get a lot of support from private shareholders who have seen rivals like Lloyds Banking Group refocusing on retail banking and, in my view, improving their prospects for long-term stability in the process.
Many will still be blaming the fat cats of the investment banking business for the financial crisis, and will see that whole section of the banking industry as a big long-term risk, despite the lucrative potential it might have in healthy times.
Heading them off?
According to the Financial Times, Barclays is planning to cut investment bank bonuses ahead of the AGM, in a bid to take some of the heat away from that aspect of its operations — perhaps shareholders might be less persuaded by Mr Bramson’s charm if they see a little less cream disappearing in that direction?
Barclays has apparently been tight lipped in response to the FT’s claims, but I really can’t see such a sop being a persuasive strategy against Mr Bramson’s supporters.
I’m on the side of those who want Barclays to follow its peers by refocusing on the profitable and relatively safe retail business, and working towards building its cash flow for rewarding hard-pressed shareholders who have suffered paltry total returns over the past decade.
Share price
But even now, with EPS forecasts returning to strength, we’re looking at forecast dividend yields of 4.8% and 5.5% for this year and next, from shares on a P/E of only around seven.
A more attractive strategy could give the share price a boost, but the big difference could come from the UK seeing sense and backing away from a suicidal no-deal Brexit.