During the Monday session on the London Stock exchange, the shares of Barclays plc (BARC) are up 5%. The stock was trading at 97.5p by the end of Friday, but now at the moment, it has reached 102.2p.
From the previous Monday, the UK government has launched the so-called ‘Bounce Back scheme’. According to this program business owners can apply for a long, the sum can range from £2,000 to £50,000. According to the officials, the procedure for applying to government back loans is simple. Customers can fill the application online, answering 7 questions about their business. This includes information about their turnover, business activities, and tax details. According to the terms of government sponsorship, all such loans have a flat interest rate of 2.5%.
Barclays originally promised its clients that those requests will be processed within 24 hours. However, the actual number of applications turned out to be much higher than anticipated. As a result, many business owners experienced delays up to 9 days. In response, Barclays management apologized to its customers because of those problems and offered a £100 compensation to ‘bring this matter to a close’.
The bank itself has over 325 years of history and annual revenue of £21.6 billion. In 2019, the pre-tax profit of the company reached £6.2 billion.
During 2016 and 2017, the bank faced challenging times because of Brexit fallout. Because of this the total annual dividend remained at 3p per share. However, by 2019, the Bank managed to triple this amount to 9p per share. Despite this success, the future of those payouts to shareholders is uncertain. The Bank of England did ask the banks to temporarily cancel dividend payments. Consequently, the management announced that it will decide on these issues by the end of 2020.
Are Barclays Shares Still Far from February levels?
As we can see from this chart, despite today’s good performance, BARC is still far away from returning to February levels. In the second half of 2019, the stock made significant progress, rising from 150p to 180p by the end of the year. However, as COVID-19 pandemic concerns started to dominate the market, it fell sharply. Barclays shares have recovered in April and now trade near 102p.
According to the latest numbers, earnings per share of the stock is 11.7p. This means that at current prices, the price to earnings ratio of the company stands at 8.7. If the firm’s management decides to maintain its 9p total annual payout to shareholders, then the dividend yield of the stock will be 8.8%. Both of those indicators point at the fact that Barclays shares might be significantly undervalued.
However, considering the most recent financial results, it is highly unlikely that the firm can avoid cutting the dividend. According to the first-quarter report, the after-tax profit was £842 million, 32% lower than a year ago. So it might take some time before the bank could restore its profitability.
According to CNBC, the stock has a beta of 1.52. This suggests that BARC is significantly more volatile than most FTSE 100 components. So if the situation improves, Barclays shares might recover faster than some of its peers.