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The FTSE 100 is filled with distinctive worth shares. The UK’s main share index is up 3% since 1 January. However ongoing fears over the macroeconomic and geopolitical panorama imply many top-quality shares proceed to commerce on rock-bottom valuations.
Shares in banking big Barclays (LSE:BARC) have slid 5% throughout 2023. Which means that — on paper no less than — it affords distinctive all-round worth at present costs of 149.1p per share.
This low-cost share at present carries a price-to-earnings (P/E) ratios of under 10 instances for the brand new yr. It additionally boasts a dividend yield effectively above the three.9% Footsie common, suggesting it could possibly be nice inventory to purchase for passive revenue.
However is the embattled financial institution too low-cost to overlook this Christmas? Or may it find yourself costing me a fortune?
Dangerous loans rising
Banking big Barclays has some huge benefits over UK-focused rivals like NatWest and Lloyds. Its vital publicity to the US means it may outperform its FTSE 100 friends subsequent yr ought to financial situations there stay sturdy.
But rising impairments on each side of the Atlantic are a worrying signal for the enterprise heading into 2024. Certainly, group loans are literally selecting up momentum because of mounting delinquencies at its US card enterprise. Group impairments exceeded £1.3bn within the 9 months to September, up from £722m a yr earlier.
They may proceed marching northwards too if rates of interest stay at elevated ranges.
NIMs underneath strain
Retail banks additionally face an unsure future as central banks have probably ended their rate-hiking cycles. This implies their web curiosity margins (NIMs) — which measure the distinction between the curiosity they provide savers and cost debtors — would possibly fall sharply from this yr’s ranges.
This key measure of banks’ efficiency are additionally underneath menace as competitors within the financial savings market intensifies. In a troubling omen Barclays truly lowered its NIM forecasts for 2023 in October. The FTSE 100 agency lower its full-year estimate to three.05-3.1% from 3.15-3.2% beforehand.
Qatar indicators hassle?
The Qatari wealth fund’s choice this month to halve its stake within the financial institution is an extra signal that Barclays faces hassle subsequent yr. As Hargreaves Lansdown analysts have commented:
with an upcoming technique report due from Barclays, many within the markets discovered the timing of the deal slightly odd, and prompt the Qataris are usually not optimistic in regards to the financial institution’s plans.
Barclays is reportedly cooking up contemporary plans to guard its earnings throughout this troublesome instances. These are mentioned to contain slicing of as much as 2,000 jobs to reserve it £1bn, Reuters journalists wrote final month. However this isn’t a gamechanger for the financial institution’s funding case given the opposite issues it faces.
The decision
Proper now, Barclays shares commerce on a P/E ratio of simply 4.7 instances for 2024. It additionally carries a meaty 6.5% dividend yield.
I believe this low valuation is a good reflection of the colossal headwinds the corporate faces subsequent yr and probably past. This is the reason I’m looking for different FTSE 100 worth shares to purchase in the present day.
