The Resilience of Barclays

Barclays reported on their 2007 results today and I watched the webcast of the presentation and related interviews. After all the press speculation and turbulence through the latter half of the year management seemed reasonably happy to report profits which were flat on 2006 and, despite some hysterical prior speculation about shortage of capital, a Tier 1 ratio which was above target. As if to push back further against critics the dividend was increased by 10%.

It must be very hard for top management in a bank like Barclays being questioned by analysts from competing banks and whom, were they employed by your own bank, would be relatively junior executives many rungs down the ladder. Indeed from the questioning it seemed some do not really understand bank balance sheets very well, although Barclays are to be commended for improving their disclosure of the "unusual" assets currently giving rise to angst. Mind you they needed to. No longer do bank assets comprise simple loans to be analysed by industry and geography but the now infamous and eclectic collection of exposurers to ABS CDO, Sub-prime, Alt-A, Monoline Insurers, SIV, SIV-Lite and Structured investment vehicles.

OK the outlook is more uncertain (or at least this time we know we don't know whereas usually we don't know we don't know) but for a strong, diversified and multinational business (mainstream UK Banking is only 1/3rd of profits) the current P/E of 7.3 and yield of 6.9% seem likely to prove ridiculously low.