Headquartered in London, Barclays plc is a British multinational investment bank and financial services company. Incorporated on the 20th of July 1896, Barclays has grown to become one of the largest financial services companies in the world. The company offers a wide range of services including online investments, stock trading, banking, corporate banking, forex, personal banking, and wealth management. The company comprises two main segments; Barclays UK and Barclays International.
Barclays UK is the company’s consumer and business banking division in the United Kingdom. It is the company’s banking operation for customers in Britain, offering transactional, investment and lending products as well as small business services, wealth management and credit cards, to more than 24 million of its customers in the country.
Barclays UK has allowed the company to diversify the balance of its products and services within the UK banking sector. This division has contributed extensively to the company’s margin-led income.
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Barclays traces its roots way back to 1690, when Thomas Gould and John Freame, two goldsmith bankers, started trading out of Lombard Street in London. When Freame’s son-in-law, James Barclays, became a partner in 1736, the company became known as ‘Barclays.’ To date, the name Barclays has remained a constant fixture in the financial services business.
Towards the end of the 19th century, many of the smaller family-owned banks in the United Kingdom, such as Barclays, were unable to stand toe to toe with bigger joint-stock banking operations. Because of this, in 1896, 20 small banks came together to form a larger corporation: Barclays and Company Limited.
The bank that resulted from this amalgamation in 1896 had 806 staff spread across 182 branches. Still, most of the new bank’s branches were within the South East region of England, with 192 of its staff working at 54 Lombard Street, the location of the original Barclays bank. Because of this, Barclays and Company were not yet considered a national bank. Over the next 20 years, the bank sought to remedy the situation by taking over more of the smaller family banks across the United Kingdom.
By the time 1920 rolled around and the UK Treasury put a stop to any further amalgamations and acquisitions between the bigger financial institutions, Barclays Bank Limited (the bank had been renamed in 1917) had become Britain’s third-largest bank.
Over the years, the bank continued to grow, with a highlight of its earlier years being its acquisition of Martins Bank in 1968. To date, the bank has continued on its path of growth through the amalgamation and acquisitions of smaller banks. In August 2000, Barclays took over Woolwich PLC, a building society founded back in 1847, in a £5.4bn acquisition.
In 1986, Barclays branched out from its traditional retail and commercial banking operations to establish an investment banking division, which is now known as Barclays Capital. This is a major division of the company that manages the development and growth of larger institutional and corporate customers.
In 1995, Barclays acquired Wells Fargo Investment Advisors and integrated the company with BZW Investment Managers to form a new subsidiary, Barclays Global Investors. In June 2009, Barclays sold BGI to BlackRock for £9.5 billion, including 37.567 million new BlackRock shares, giving Barclays an economic interest of 19.9% of the enlarged BlackRock group.
In 2003, Barclays purchased Juniper Bank, the American credit card company, from CIBC. They re-branded the company as Barclays Bank Delaware. In the same year, Barclays acquired Banco Zaragozano, the 11th largest Spanish bank.
In May 2005, Barclays moved its group headquarters from Lombard Street in the city of London to One Churchill Place in Canary Wharf. In the same year, Barclays sealed a £2.6bn takeover of Absa Group Limited, South Africa’s largest retail bank, acquiring a 54% stake on 27 July 2005.
Their acquisitions continued in 2006, when Barclays purchased the HomEq Servicing Corporation for US$469 million in cash from Wachovia Corp. In the same year, the financial website Compare The Loan was also acquired.
By 2018, Barclays plc had grown to be one of the largest providers of financial services in the world, providing a host of banking and investment services to customers in more than 50 countries, with more than 80,000 employees worldwide.
Barclays Stock History
Barclays’ primary listing is on the London Stock Exchange and it is also a constituent stock of the FTSE 100 index. Barclays’ secondary listing is on the New York Stock Exchange (NYSE). Qatar Holdings, which is an investment company owned by the State of Qatar, is Barclays plc’s largest shareholder.
As early as August 2009, the Barclays share price recovered from the 2008 financial crisis to 350p a share. However, it’s never been back to that level since and as of October 2018, it is trading below 200p, at 161p per share. The company saw its shares fall by 16.5% in 2018, declining over 40% between 2013 and 2018. This marks the worst five-year performance of the FTSE 100 banks, falling behind even Lloyds Banking Group and the Royal Bank of Scotland, both of which needed government bailouts.
Barclays regularly pays dividends to its shareholders and on the 17th of September 2018, the company paid a dividend of 2.5p per share.
The buying of undervalued stocks is what many successful investors in the world do since they are certain they are likely to rise in value in the future. As many shareholders of Barclays plc (LSE: BARC) have found out, this is a strategy that requires patience. While many stockholders would give up and cut their losses with such performance, the volatility of the shares of such an inherently valuable company is a goldmine for short, medium and long-term investors.
With Brexit on the cards, the bank may have some rocky times ahead in its immediate future, yet analysts predict a 4.4% increase in the share price in 2019.
How to Trade Barclays Stock
While Barclays plc underperformed on the London Stock exchange during 2018, with their strong fundamentals, they are expected to bounce back. Barclays plc trades on the LSE under the ticker: BARC, and on the NYSE as: BCS
When considering an investment in Barclays, you should consider the following:
- Legislative and Taxation Changes
As of October 2018, Barclays had a massive market cap of around £36.3 billion, making it one of the biggest financial institutions in the world. As many big-cap financial industry players return to health, following the global financial crisis, there is increasing confidence in the ‘too-big-to-fail’ stocks like Barclays.
With this recovery, a new set of financial reforms in Europe, known as Basel III, have been introduced. The reforms were set up to bring about improved supervision, risk management and regulation within the European financial services sector. These reforms were designed to improve the ability of financial institutions to absorb the shocks that result from economic stress. As one of the world’s largest banks, BARC found itself exposed to tighter scrutiny with regard to the level of risk it is subject to. Traders need to review how these reforms will impact Barclays in the short and long term.
- Recovery from Misconduct Charges
Because of Basel III, Barclays plc’s CEO, Jes Staley, was under sharp focus due to the way he handled a whistleblower incident in 2016. Still, he has managed to successfully resolve many of the misconduct issues that were highlighted. The largest of them resulted in Barclays settling to the tune of £1.4 billion with the U.S. Department of Justice in early 2018. This was over the sale of mortgage-backed securities in the lead-up to the 2008 financial crisis. However, without the burden of further litigation, the financial group’s prospects look better for the future.
- Competitor Performance
Before the global financial crisis, this 300-year-old fixture of the financial sector in Britain had become the epitome of the industry’s excesses. News headlines in 2017 – 2018 lamented the lavish bonuses that the bank handed out to its senior figures as well as its reckless, unlawful and often arrogant methods of operation. The bank’s wrongdoing not only tarnished its reputation but also cost it financially, with Barclays paying more than £16 billion in penalties.
These penalties, resulted in a massive drop in the BCS stock price in 2018, which trails BNP Paribas, HSBC Holdings and several other competitors. In fact, by late September 2018, the bank’s market cap of about £36 billion was lower than that of Lloyds Banking Group, a UK lender that was bailed out during the financial crisis and who had been partially nationalized until 2017.
- Periodical Earnings Reports
For the bank’s share price to rise, investors are watching out for the end of the misconduct charges. Still, this is not enough – Barclays’ assets should do the heavy lifting. A way to measure this is through the Return on Equity (RoE), which is a comparison of a bank’s profit after tax and its net asset value.
There is good news on this front: In the first half of 2018, the company’s average return on equity jumped from -1.6% to an impressive 11.6%. What this means for long-term investors who hold BARC shares and for traders on the London Stock Exchange, is that the share price is should rise and that there are big dividends on the way as the costs resulting from the litigation and misconduct charges are put in the past. For shorter term UK investors, volatility like this means plenty of opportunities to profit from trading Barclays stocks.
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