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Should You Hold on to Barclays Stock on Solid Streamlining?

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On Aug 26, 2016, we issued an updated research report on UK-based banking giant Barclays PLC (BCS - Free Report) . The company’s ongoing restructuring and streamlining efforts have started bearing fruits, bringing down operating expenses. However, muted revenue growth and a stringent regulatory landscape remain major concerns.

Barclays is making sustained progress in simplifying operations and focusing on core businesses. With this aim, the company restructured its business lines into two divisions and continues to divest/close operations that are not strategic and less profitable. While these will lead to an increase in restructuring costs, it will also improve profitability over time.

Further, Barclays has been witnessing persistent fall in operating expenses over the last several quarters. Expenses are declining due to the above-mentioned strategic initiatives and job cuts. Notably, since Dec 2015, the company has lowered its workforce by nearly 12,000. Moreover, management reiterated its operating expenses (excluding conduct and litigation and other notable items) target for the Core division at £12.8 billion for 2016.

Given the persistent progress in its restructuring efforts, analysts seem to be bullish on Barclays. Over the past 30 days, the Zacks Consensus Estimate increased 8.8% and 1.2% for 2016 and 2017, respectively.

However, in the absence of a significant turnaround in the prevalent low rate environment, core operating performance is likely to remain under strain as net interest income, net fee and commission and net trading income remain subdued. Apart from these, legal woes continue to affect bottom line.

These concerns as well as the Brexit chaos are likely to have an unprecedented adverse effect on Barclays’ financials in the quarters ahead. All these had an adverse impact on the company’s share price, which has plummeted over 33% year to date.

Currently, Barclays carries a Zacks Rank #3 (Hold).

Stocks Worth a Look

Some foreign banks worth considering include Itaú Unibanco Holding S.A. (ITUB - Free Report) , Bank of Montreal (BMO - Free Report) and Banco Bradesco S.A. (BBD - Free Report) . All these stocks hold a Zacks Rank #2 (Buy).

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