Dear Mr. Berko: I’m 77 and still mentally sharp, so I feel silly that I have to send you this email. What do you think of Barclays’ stock? I’m considering the purchase of 5,000 shares for my account. My stockbroker, who has been a close friend of mine for several years, doesn’t like the stock, and I’m not comfortable going against his opinion. He and I have been reading your column for over 20 years, and he respects your opinions. I can afford the risk, so if you like the stock, I won’t have to go behind his back to buy Barclays.
— H.D., Erie, Pa.
Dear H.D.: Barclays PLC (BCS-$8.38), founded in 1895, is a British multinational financial services company that’s more commonly known as a very large bank. BCS is home-ported in London and helmed by CEO Jes Staley, a brilliant 59-year-old American banker who joined J.P. Morgan at age 25, ultimately becoming its CEO. In December 2015, Staley joined BCS with the expectations that his impressive management skills at running JPM would be duplicated at BCS. Staley will be spending a good deal of time building capital, carefully streamlining operations, eliminating numerous redundancies, improving communications and reducing staff, all with a goal to make BCS among the most efficient and profitable publicly traded banks. Staley will sell many of BCS’ noncore businesses, including its difficult African operations. Staley will also reorganize BCS’ important investment banking operations, which in the past were poorly managed and had difficulty controlling costs. Staley is also revitalizing retail operations — including British credit cards, personal loans, individual checking accounts, wealth management and business banking — most of which were eschewed by previous management in favor of the glory of international investment banking.
Last year, BCS — with $1.6 trillion in assets, $347 billion in commercial loans and $28 billion in revenues — lost 12 cents a share. And some analysts forecast a 15 percent decline in 2016 revenues as BCS begins to exit numerous noncore assets to focus on capital costs. Meanwhile, core revenues are coming in flat, though the anticipated fallout from Brexit has been a huge yawn. If BCS earns 79 cents a share this year as Standard & Poor’s expects, then the 38-cent dividend, yielding a comfortable 4.4 percent, won’t be reduced again. And when BCS is finally free from the drag of its noncore assets, Wall Street expects better earnings in those years ahead.
I think you’re on the right track, and if a wise lady like you can afford the risk, then buy 5,000 shares. BCS traded in the low $60s before the market tanked 10 years ago and traded in the high $10s until late 2015, when the U.K. began making Brexit noise. BCS has over 22 million “retail” customers and over 1 million business clients. There are operations in over 40 countries, employing 130,000 people. And I think a 5,000-share purchase of BCS is a jim-dandy classic wager on a beaten-down, trashed but gilt-edged world-class security that will continue to be a part of Britain for another 100 years. I believe that in the coming decade, BCS will regain much of its previous glory, improve its dividend and trade in the mid-$30 range.
