Bank group Barclays announced first-half profits of £2.64bn, down one-third on a year ago. The fall was mostly due to a one-off charge for missold payment protection insurance. Overall, results were respectable, but the market remains unconvinced and the stock is one of the lowest valued major firms in Europe, on a price/tangible-book-value ratio of 0.62.
What the commentators said
Barclays did OK with these results, said Nils Pratley in The Guardian. "It was a sensible move to give detailed disclosure of the bank's assets in Greece, Ireland Portugal, Spain and Italy." That didn't reassure everyone. "Barclays has lent [the PIIGS] or firms or individuals within them £75bn. The spreading of the crisis ... would be extremely painful," said Patrick Hosking in The Times. But others were more upbeat, including Pratley. "About half the assets are mortgages in Spain, Italy and Portugal, where the average loan to current market value is just over 50%. In theory, then, the risk of major write-offs is low."
The bigger fear is that government plans to split investment and commercial banking remain on the agenda, said the FT's Lex column. "That affects Barclays more than any UK rival." But might the discount be too deep anyway? "Value the retail businesses at a standard sector multiple, add Barclays' stakes in BlackRock and the South African bank Absa, and the result is about Barclays' stockmarket value." So in effect, investors are paying nothing for investment banking. However, CEO Bob Diamond will need to improve the "distractions" of its weak corporate banking and European retail arms before investors take his claims of a turnaround seriously.
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