Author Topic: BARC (London) = Barclays  (Read 5636 times)

Viking

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Re: BARC (London) = Barclays
« Reply #10 on: January 29, 2018, 11:20:09 AM »
ajc, I do not follow Barclays or any of the European banks so filter what I have to say accordingly.

Points I think are important:
1.) is management any good? My experience is it takes listening to about 3 conference calls for me to start to develop an opinion on management.
2.) are all the skeletons from the Global Financial Crisis out of the closet? My understanding is the UK and Euro banks were not forced to fix their issues like their US peers.
3.) Brexit. Not sure how this will be good for the UK.
4.) GDP growth (tied to 3 above). Looks to me like UK will underperform.
5.) Regulatory. Is the UK embarking on any Trump type reforms (cut regulation and taxes to spur growth).

My top line, uninformed read is Barclays is facing lots of headwinds in 2018. There are also tailwinds (like rising rates). The picture for me is murky. This is not to say that the stock will not double in 2018 (I have no idea). Best of luck!
« Last Edit: January 29, 2018, 11:24:12 AM by Viking »


John Hjorth

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Re: BARC.L - Barclays PLC
« Reply #11 on: January 30, 2018, 06:23:13 AM »
I started reading about this bank last night, so I have nothing to add so far, - except this really fast started looking like a tough one! [ : - ) ]

For me, it will at least be interesting to learn something about the UK banks. I have never before looked at any of them.

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onyx1

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Re: BARC (London) = Barclays
« Reply #12 on: January 30, 2018, 10:44:08 AM »
ajc,


I haven't spent time looking at Barclays, but even if I had I'd be hard pressed to offer insights.   I worked at giant European bank from 1999 to 2009.  Despite working in a high-profile, high-profit, 30-person department that regularly generated 10% of the entire group's profits, we knew nothing about what was happening in the rest of the bank. 

As a insider, it was a black box.    Today, as an outsider, it's even darker.

That said, Viking's point #2 above is critical to to the thesis.  Facing reality is cultural.  My experience is that when you have a financial institution that features prominently in a country's culture (think Japan, Swiss, UK & other European countries) it's a national tragedy to see them fail.  So local supervisors are often inclined to offer time and flexibility to keep a troubled financial institution alive.  I'd be most concerned that Barclay's is still on a feeding tube of sorts.

This is a personal suspicion based on experience. 

In addition to Viking's other points (all of which I agree with), I'd recommend looking at Barclay's non-interest bearing deposit base.   My quick read is that Barclays has less than 10% of liabilities in this category (BAC is over 20%, for example).  How sticky are these deposits?  Are they growing in number and %?  How much pressure will management have to to start paying interest? 

These are critical, for me, in evaluating the strength of the franchise. 

I have many more questions, but these two topics are were I'd begin.


ajc

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Re: BARC (London) = Barclays
« Reply #13 on: January 31, 2018, 04:05:57 AM »

ajc, I do not follow Barclays or any of the European banks so filter what I have to say accordingly.

Points I think are important:
1.) is management any good? My experience is it takes listening to about 3 conference calls for me to start to develop an opinion on management.
2.) are all the skeletons from the Global Financial Crisis out of the closet? My understanding is the UK and Euro banks were not forced to fix their issues like their US peers.
3.) Brexit. Not sure how this will be good for the UK.
4.) GDP growth (tied to 3 above). Looks to me like UK will underperform.
5.) Regulatory. Is the UK embarking on any Trump type reforms (cut regulation and taxes to spur growth).

My top line, uninformed read is Barclays is facing lots of headwinds in 2018. There are also tailwinds (like rising rates). The picture for me is murky. This is not to say that the stock will not double in 2018 (I have no idea). Best of luck!


Viking,

I'm not a bank analyst by any stretch, so the insights provided until now by you and others has already lifted the level of discussion. I will attempt an answer/play devil's advocate on a few of your points though, which goes towards the comments made by you, onyx1, John, CorpRaider, and compoundvalue.

I actually do think management is pretty good.

Staley was one of Dimon's top lieutenant's at JP Morgan for many years before it became clear Dimon wasn't retiring. Having listened to Staley speak a bit, I'd say he's got a pretty good banking mind as well as an ability to recognize opportunity. I also like that he is someone who gets stuff done, which is why he has efficiently achieved his Barclays goals so far.
My view is he's definitely a better CEO than Moynihan, he's way closer to the top of the list of current big bank CEO's than he is to the bottom.

One thing against him, is that the whistle-blowing issue was a mistake and he's already been dragged over the coals for that in the media.
I think there's a better chance he gets a suspended sentence than not, but that's just me trying to read the tea leaves and there's clearly no way to know for certain.
Anyway, that's meant to be settled by March so we'll know either way by then.

Another response to your thinking is kind of linked together and is about Britain, Brexit, and so on.

My understanding is that Britain is behind the US in terms of attacking their banking and transparency issues, but that European banks are worse. When George Osborne was chancellor, I remember RBS and all the other British banks being in the news every day about the need to fix their shortcomings and get back to a fundamentally sound footing. Given London's importance in finance, that only makes sense.

For what it's worth, I also think the UK and Europe are due a growth bump now that the US has started doing so well if for no other reason than people there have gotten tired of feeling like shit and would prefer some animal spirits to be unleashed just so they can feel good about themselves again.

Related to that is your Brexit and regulation question which I think is extremely important. I've got a contrarian view on that which is a scenario with a fair probability, that I think observers are missing. That's not to say the vote wasn't based on some very emotional thinking, but I think there's a clear way Britain might turn its lemons into lemonade on this and it's been almost totally overlooked by the markets.

Here's my take on what I consider to be a likely scenario where Britain actually does pretty well out of Brexit:

I think most of the world is missing what Trump is a signal of and what he's doing. The globalization pendulum swung very far towards liberalism in Western countries and for the next decade or two I think it's going to swing back as jobs, intellectual property, and competitive advantage get protected by various developed nations. My view is the US has started to recognize this in a substantial way. In my view, the Germans haven't really seen it. The French, and Macron, have. China hasn't really. Not yet, anyway.

I would try for a Reagan-Thatcher type relationship if I was May and become the best friend of the US. I'd also follow their policies largely because frankly that's the only way the UK can turn this into a win. What that means is deregulate, privatize whatever industries already haven't been, drop taxes even a little more maybe, and create huge economic incentives like the US for European companies to headquarter themselves in the UK.

For me, it makes total sense. They won't need agreement from other EU countries, it'll be the perfect way to flip the bird at what they perceive to be EU bureaucracy and stodginess and frankly it's the only real option they have. So, my guess is when the reality hits they'll see Trump is the best bet and then the US, the UK, and France will all start to push hard internationally for low taxes, business-friendly deregulation at home, protections for local industries and workers from unfair trade practices, and great incentives for corporations who agree to headquarter in any of those places.

Now, I know that's not being considered as a real potential scenario by anyone right now. And, if they start heading that way during the Trump visit to Britain this year then I think sentiment towards Brexit could change significantly and that could create market upside. If Britain is able to turn this into a positive and the narrative changes, I think all bets start to be off as to the potential global economic impact of the MAGA, Brexit, and other movements across the developed world that are emphasizing business-friendly approaches and protection of national interest.

I realize that's an essay-type answer, but my point is I think that creates optimism, it spurs investment and GDP growth, it does all sorts of good things for Britain and all it really requires is for them to remake themselves as a kind of European version of Trump's America and advertise to European companies who want all those benefits but who also want to stay close to home.

Anyway, that's me playing devil's advocate and if it does start with Trump's visit this year and people start to connect the dots in Britain and outside about how to potentially play the hand they dealt themselves properly, then I think investors will start thinking that there's going to be a lot of activity and that Brexit doesn't have to be the suicide that everyone inside and out is currently making it out to be.




compoundvalue

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Re: BARC (London) = Barclays
« Reply #14 on: January 31, 2018, 05:49:52 AM »
After taking a closer look I think that this is an interesting situation.
I like Staley, I like the UK business, I like the situation where they have made things more simple, gotten rid of non core businesses and I like the de-leveraging. It seems like it is finally a well ran, well capitalized bank.
The part I don't like so much is the investment banking business and in particular the huge derivatives book. Still trying to wrap my head around this one as it currently seems to me like a black box.
In terms of the Brexit I tend to think that having full monetary and fiscal control is a huge plus for British banks and that continental Europe has far more problems than the UK hence Brexit IMO is a net plus so I share ajc's contrarian view re this. A transatlantic alliance seems to make a lot of sense but who knows.
I think that at current price Barclays could be an attractive investment opportunity if one can get comfort with the IB business and derivatives

ajc

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Re: BARC (London) - Barclays
« Reply #15 on: January 31, 2018, 07:13:15 AM »


After taking a closer look I think that this is an interesting situation.
I like Staley, I like the UK business, I like the situation where they have made things more simple, gotten rid of non core businesses and I like the de-leveraging. It seems like it is finally a well ran, well capitalized bank.
The part I don't like so much is the investment banking business and in particular the huge derivatives book. Still trying to wrap my head around this one as it currently seems to me like a black box.
In terms of the Brexit I tend to think that having full monetary and fiscal control is a huge plus for British banks and that continental Europe has far more problems than the UK hence Brexit IMO is a net plus so I share ajc's contrarian view re this. A transatlantic alliance seems to make a lot of sense but who knows.
I think that at current price Barclays could be an attractive investment opportunity if one can get comfort with the IB business and derivatives



Not that this guarantees anything, but Staley worked at JP Morgan's investment bank for 30+ years and ran it for 4 of them.



petec

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Re: BARC (London) = Barclays
« Reply #16 on: January 31, 2018, 07:28:40 AM »
I know neither bank well but it might be worth comparing to Lloyds, arguably its closest listed peer when it comes to UK high street banking.

Ballinvarosig Investors

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Re: BARC (London) = Barclays
« Reply #17 on: January 31, 2018, 08:05:28 AM »
I know neither bank well but it might be worth comparing to Lloyds, arguably its closest listed peer when it comes to UK high street banking.
Barclays is essentially three different businesses all bolted together.

The Barclaycard business is excellent, generally very consistent, earning great ROE. Their UK banking business is decent, respectable return on ROE, generally quite risk averse, even during 2007. The real dog is their investment bank, this has generated sub-par ROE for years now and has caused nothing but headaches as well thanks to all the trouble they got into with LIBOR rigging and mortgage repackaging.

If they just liquidated the investment bank, or sold it, you would actually have a very nice little business, when compared to peers with regard to profitability, it would probably trade at about 0.9x or 1.0x book.

ajc

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Re: BARC (London) - Barclays
« Reply #18 on: February 03, 2018, 09:15:47 AM »

Barclays now selling for 0.47x BV after the recent sell-off.
At the same time, they expect to book a $1.34B charge as a result of the US tax overhaul.
Goldman Sachs fell by around 4% after announcing something similar.



ajc

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Re: BARC (London) - Barclays
« Reply #19 on: February 05, 2018, 05:08:36 AM »

https://cc.talkpoint.com/barc002/091117a_as/?entity=65_2N71DY2

Recent 45 minute presentation with slides by Tim Throsby (the CEO of investment banking at Barclays) on how they currently see and judge the various parts of the whole company (including their card businesses), and how they aim to reach their stated goals over the next few years.

I think it's also worth noting that Tim Throsby was hired away from JP Morgan. In fact Jes Staley hired so much great talent away from JP Morgan to build his executive team, that in the end Jamie Dimon had to place a threatening call to the president of Barclays and get him to make Staley stop. See story below:

https://dealbreaker.com/2017/09/dont-fuck-with-jamie-dimon-barclays-edition/

Now on the one hand, that seemingly placed a big strain on their friendship. On the other, I admire Staley's chutzpah to go build an amazing executive team even if it meant heading to his former employer and making great offers to some of their best people.

« Last Edit: February 05, 2018, 05:16:32 AM by ajc »