EUR 850.00 For Business Accounts Only

Morningstar | Barclays' 1Q 2019 Results: We Are Maintaining Our FVE

We believe Barclays, having completed its restructuring plan, will be ahead of peers in terms of focusing on its core business and grabbing market share. Litigation costs and conduct charges that were hanging over the bank have largely been resolved with the U.S. Department of Justice settlement regarding residential-mortgage-backed securities. Downside risk related to missold payment protection insurances remains, but we view the capital set aside by management as adequate to cover future charges. All in all, Barclays is set to focus on profitability and returning cash to shareholders in the form of dividends, which not only comes as a result of resolving a large chunk of legacy issues, but also speaks to its healthy capital position and improved operational outlook. While the bank is exposed to some downside risk due to Brexit, as 53% of its income is generated in the U.K. (35% from the U.S) and more than 65% of net loans are sourced there, we believe the risk is in line with other U.K.-based peers. We also believe any costs that may occur due to the loss of passporting should be manageable, as management indicated several options that the bank is considering. We believe Barclays’ current capital position, a common equity Tier 1 ratio of 12.6%, is sufficient to absorb any short-term headwinds that may arise from litigation and conduct costs, a possible downturn in the investment banking business, or a slowdown of the U.K. economy due to Brexit, given its diversified business both on a geographical and a segment level.