By William Mills
Earlier this year I sold my holdings in Barclays PLC for between 313 p and 327 p per share.
Last week Barclays announced their third quarter results. There was a time when only one set of figures were released. Then some bright spark on far too large a salary dreamed up publishing ‘underlying profits’ along side the traditional ‘statutory’ set of accounts if the latter were too ghastly to contemplate.
It backfired on Barclays this time as the ‘adjusted underlying’ results were awful, whereas the statutory figures recorded a near tripling of the profit.
The share price correctly started to rise before fresh market rigging scandals dragged it down to a very attractive 255 p with some large buyers coming in late on Monday.
Why is Barclays such a good buy?
If a bank was broken up and sold piecemeal, and after all the bills had been paid, the final amount returned to shareholders is best reflected in the accounts by the ‘Net Tangible Assets per Share’ as shown on the Balance Sheet.
Competitors Lloyds Banking Group PLC is trading at a premium of 53% at present. [NAV of 51 p per share against market price of 77 p]. HSBC is around 23% and Standard Chartered about 50%.
The latter two are both profitable and paying a dividend in the region of 4%.
Lloyds is yet to pay any while hoping to doing so one day in the future.
Barclays are already paying a 2% dividend and their Tangible NAV at 291 p is below their current share price. If Lloyds ratio of 53% was to be copied Barclays’ share price would be in the region of 450 p making the brokers’ average estimate of 300-330 p infinitely believable.
The author has recently bought some.