First-half results from Barclays (LSE: BARC) on Thursday were dominated by a 40% slump in pre-tax profit in the second quarter. From a figure of £2.6bn reported for the second quarter of 2021, the bank recorded just £1.5bn this year. That was short of analysts’ expectations, and in response we saw a muted reaction in the Barclays share price.
The profit fall is all down to a blunder last year. Barclays sold a whole load of US securities that it had not been authorised to sell. It’s in the process of buying them back. And that’s led to £1.3bn in litigation and conduct charges in Q2.
The bank says it “now expects FY22 total operating expenses to be around £16.7bn versus previous outlook of £15.0bn“.
The Barclays share price still remains weak, after a slump following the various global crises of 2022.
But what does this all mean for investors? I think it means we’re seeing an extended buying opportunity, and I rate Barclays shares as good value.
Progressive dividend
Despite its costly one-off mistake, Barclays still lifted its interim dividend by 12.5% to 2.25p per share. The bank says the interim dividend is “expected to represent, under normal circumstances, around one-third of the total dividend for the year”.
On that basis, we should expect a full-year dividend of 6.75p, for a yield of 4.3% on the current Barclays share price. Analysts expect it to remain progressive too, rising above 6% by 2024.
That is a long way out, mind. And as we’ve seen so far this year, a lot can happen in a much shorter space of time. But Barclays did reiterate its aim of “delivering attractive total cash returns to shareholders“.
On top of the 2.25p interim dividend, the bank has announced a further share buyback of up to £500m. That should complete the £1bn buyback announced at the time of 2021 results by the end of September.
Bad behaviour
There is one thing that does disturb me about Barclays. Over the years, it does seem to have racked up more than its fair share of regulatory misbehaviour. Without all of that, and the associated costs and penalties, I can’t help feeling the Barclays share price could be further ahead today. And I prefer to invest in companies whose management I trust enough not to cost me money through questionable activities.
But I still see Barclays as an attractive long-term buy. It seems increasingly likely that the Bank of England will raise interest rates further, with the next Monetary Policy Meeting on 4 August. And that would boost potential lending margins for banks like Barclays.
Risky outlook
We do still face huge economic uncertainties. And I couldn’t even guess at the levels of impairments that the banks might have to take before the year is out.
But I reckon Barclays is in a strong enough financial position to weather the storm, and provide solid long-term investor returns even if there’s further short-term pain. I’d buy.