Barclays Report

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• Barclays reported PBT of £11,642mn fully in line with our estimates
of £11,626mn and 2% better than company consensus. Underlying
PBT came in at £11,720mn a 5.7% beat to JPMe of £11,090mn
adjusted for: (i) total write downs of £6,086mn; (ii) loss on own debt
of £1,820mn; (iii) £6,579mn gain on sale of BGI and others; and (iv)
£1,249mn gain on exchange offers. Note that we have not adjusted
earnings for a £1,162mn gain from a structural equity hedge and
£1,364mn from an interest rate hedge.

• We have focused on three main areas;

• Resilient revenues at BarCap – PBT was in line although revenues
were better than expected, especially relative to their IB peers. Q4
revenues came in at £3,673mn (JPME £3,339mn) flat on Q3 whereas
IB peers have seen this fall on average by c.30%. We suspect this is a
result of strong origination volumes. Total write downs were slightly
higher than what we expected but they made up for it on the expense
line with a clean cost to income ratio of 42% in Q409 compared to
50% in Q3. BarCap reported a comp ratio of 38% in Q4.

• Provisions better than consensus and company guidance -
Provisions came in line with our estimates at 135bps of average loans
compared to guidance of 130-150bps. Going forward we expect a
13% absolute decline in this number.

• Capital came in better – RWAs fell by more than expected to £383bn
(-6% HoH). As a result core Tier 1 ratio came in better at 10% and we
have adjusted our RWAs estimates going forwards.

• Valuation – We increased our SoP based PT from 280p to 305p to
reflect a better capital position and improvement in earnings. Our new
stated NAV for 2010E is now 352p (old 330p) and JPM adjusted NAV
286p (old 265p) which implies Barclays is trading on 0.8x 2010E
NAV. Barclays (N) remains our favourite UK domestic bank.

FULL REPORT HERE