The Barclays (LSE: BARC) share price picked up a couple of percent in early trading on the back of Q1 figures. It’s only a small improvement, but anything is welcome after the stock fell 22% over the past 12 months.
In line with other banks, Barclays took a credit impairment charge against the worsening economic outlook. But it was also modest, at £100m. And income for the quarter came in ahead of last year.
HSBC Holdings and Lloyds Banking Group have previously reported similar impairment charges with their first-quarter updates. So seeing Barclays do so too was really not a surprise. In fact, looking at the current world economy, I think rising credit impairments were pretty much inevitable.
Income rising
Barclays’ group income grew by 10% compared to the Q1 a year ago, reaching £6.5bn. That however, fed through to a fall in attributable profit from £1.7bn to £1.4bn. Barclays put that down to litigation and conduct charges.
Part of it resulted from the over-issuance of securities by Barclays in the US, exceeding the amount registered with the SEC. The excess amounted to a whopping $15.2bn, which was careless to say the least.
That was in March, and it resulted in the 2022 Barclays share price fall. Barclays shares are down 22% over the past 12 months. And the price has tumbled 34% since January’s high point.
Maybe I’m cynical, but I can’t help thinking that bad bank behaviour could provide us with buying opportunities. Banks, including Barclays, have been hit by misbehaviour costs and penalties plenty of times. But they tend to be inconsequential in the long-term run of things.
The banks keep bouncing back, and their share prices keep on recovering.
Buyback resumption
As well as direct costs, Barclays postponed a planned share buyback programme at least until Q2. In the latest, the bank says it wants to launch it “as soon as practicable following resolution of filing requirements being reached with the SEC.” Getting the buyback back on track could well give the Barclays share price a boost.
Including the £0.5bn in litigation and conduct charges from the first quarter, Barclays now expects full-year total operating expenses to come in around £15bn. See what I mean about misbehaviour costs being small compared to the big picture?
We should see impairment charges continuing, due to “geopolitical uncertainty and cost of living pressures.” But Barclays reckons the total should stay below pre-pandemic levels.
Barclays share price valuation
On the valuation front, I wouldn’t put too much store on forecasts right now. Not after the events of the opening quarter and the worsening economic outlook.
But on the current Barclays share price, FY 2021 results suggest a trailing P/E of only four. And a repeat of last year’s dividend would provide a yield of 4.1%. Barclays has reiterated its progressive dividend policy, though how that will work out this year is up in the air.
Investing in banks in 2022 clearly comes with risk from the darkening geopolitical horizon and from economic pressures. But I’d buy Barclays today.