Do Barclays PLC’s Q3 Results Indicate Turnaround Potential Versus Lloyds Banking Group PLC, Prudential plc, HSBC Holdings plc And Standard Chartered PLC?

Will Barclays PLC (LON:BARC) reverse its underperformance of Lloyds Banking Group PLC (LON:LLOY), Prudential plc (LON:PRU), HSBC Holdings plc (LON:HSBA) and Standard Chartered PLC (LON:STAN)?

Barclays PLC
Barclays PLC

Barclays PLC (LON:BARC) (LSE:BARC.L) has released Q3 results. They show a rise in core profit before tax of 4%. This reflects the diversification benefits from consumer and wholesale customers, geographies and products, as well as the appreciation of the dollar and euro versus sterling.

Barclays has reported a double digit core return on tangible equity of 10.7%. Its UK return on tangible equity for the UK was 20%. Net interest margin increased 7 basis points to 3.63% on increased customer deposit balances but this was offset by lower interchange fee income in Barclaycard Consumer UK and higher credit impairment charges following a one-off management review.

International return on tangible equity was 10.5%, driven by strong growth in consumer, cards and payments products as well as encouraging CIB performance. However, group profit before tax decreased by 10% to £2.9 billion. This was driven by the acceleration of non-core rundown resulting in a 33% increase in loss before tax to £2 billion. Further, tangible net asset value per share decreased to 287p, driven by a £600 million provision for UK customer redress and an unfavourable movement in defined benefit pension net assets.

In the last year, Barclays’ share price has fallen by 27%. This is a worse performance than financial peers Lloyds Banking Group PLC (LON:LLOY), Prudential plc (LON:PRU), HSBC Holdings plc (LON:HSBA) and Standard Chartered PLC (LON:STAN). Lloyds is down 25%, HSBC is up 21%, Standard Chartered is down 4% and Prudential has declined by 8% in the last twelve months.

In my view, Barclays continues to face an uncertain future. However, it has the potential to record improved performance over the medium to long term. Its shares may prove to be volatile in the short run. However, I feel it has investment appeal, especially when its price to tangible net asset value is 0.6.

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