Barclays signal downtrend on Q1 2017 decline in net profit

May 1, 2017
Barclays signal downtrend on Q1 2017 decline in net profit August 17, 2018 Clive Nelson

The British lender Barclays Plc (NYSE: BCS) reported better than anticipated fiscal 2017 first-quarter profit after tax, compared to last year. Following the announcement of results, the stock rallied around 7% to record a high of about $11.80. However, profit

booking brought the stock to $10.82 on Friday. We anticipate a continuation of the short-term correction in the stock price due to reasons mentioned below. For the fiscal 2017 first quarter, the bank reported total income of £5.82 billion, up 16% from £5.04 billion in the similar quarter of 2016. Total revenues were in line with analysts’ estimates.

Sky News

The Q1 2017 profit before tax more than doubled to £1.682 billion, from £793 million in Q1 2016. The bank reported a profit after tax of £1.209 billion from continuing operations, compared with £545 million in the similar quarter of 2016. In the recent quarter, basic earnings from continuing operations increased to 6.1p, from 2.2p reported last year.

Despite this, we are not in favor of further rise in the stock price due to a 56% decline in the attributable profit.

Excluding profit after tax from discontinued operation, and non-controlling interests in continuing and discontinuing operations, Barclays reported Q1 2017 attributable profit of £190 million, against £433 million reported in Q1 2016. Correspondingly, the fiscal 2017 first quarter earnings per share declined to 1.3p, from 2.7p reported in the prior year’s similar quarter.

At the end of first quarter, the bank’s Common Equity Tier 1 ratio was 12.5%, compared to 11.3% last year. Due to a reduction in the non-core costs, the Q1 2017 cost-income ratio has decreased to 62%, from 76% reported in Q1 2016.

Thus, fundamentally, the bank is performing well. However, the forward PE ratio of about 11.50 indicates that the stock is fairly priced after the recent rally. Thus, fundamentally, the stock is not expected to rise further in the short-term.

Barclays Stock Price: May 1st 2017

Barclays Stock Price: May 1st 2017

The stochastic RSI indicator is declining, as shown in the sub-chart. This indicates an underlying weakness in the scrip. The stock is also facing resistance at 11.50 levels. So, we can anticipate a decline in the stock price.

To gain from the above analysis, a put option can be purchased from a binary broker. The contract should be bought when the stock trades near 11.10 in the stock market. Additionally, the trader should look for an option which expires on or around May 9th .

About the Author

Clive Nelson

Clive Nelson Author

Hi, my name is Clive Nelson and welcome to Traders Bible. Just to tell you bit about myself…I have been trading FX and binary options for the best part of 10 years now. After graduating with honours in economics, I began working for an investment bank in New York as an assistant trader before working my way up. After a few years, I went on to work as a broker in London, England and then eventually came back to the U.S to work in a hedge fund, where I manage $800 million of my clients’ investments. There have been times over the course of my career where I’ve had to take a hit, but I’ve accepted that losing is part of the game, it’s a learning curve. I’ve learnt from my mistakes and you don’t have to make the same errors I did. A lot of my education came from when I was a broker and this is why I’m here to tell you that Traders’ Bible offers you the foundations of how to become a great trader.

Related Articles

AmerisourceBergen tops Q3 estimates, raises FY16 EPS view

On expectations of impressive third-quarter performance, beginning June 2016, the shares of the drug wholesale company AmerisourceBergen Corporation (NYSE: ABC)

US tax reform plan turns Greenback bullish

The Kiwi dollar fell sharply on Monday after none of the parties got a majority in the general election conducted

EBA Stress Tests Reveal Weakness Of British & Italian Banks

The European Union (EU) recently carried out a stress test for as many as 48 banks in the EU and