Picture supply: The Motley Idiot
After I was wanting on the Barclays (LSE:BARC) outcomes final week, I used to be reminded of the words of Warren Buffett, who as soon as stated: “By no means spend money on a enterprise you can not perceive.”
As a shareholder within the financial institution, I used to be taking an curiosity in its 2024 outcomes, which had been launched on 12 February. Specifically, I used to be reviewing the corporate’s intensive 536-page annual report.
What’s inside?
It’s a formidable doc. It incorporates 226,195 phrases – sure, I checked! Based mostly on a mean studying velocity of 238 phrases per minute, it’d take me practically 16 hours to learn all of it. However this leaves no time for breaks. And it’d take me far longer to grasp all of it.
I’m an accountant so it’s the numbers that curiosity me most. Nevertheless, the financial statements don’t start until page 423. Earlier than that, it’s essential to wade via all kinds of different data, together with a enterprise evaluation, local weather and sustainability report, and a piece on company governance.
Danger is clearly an enormous concern for the financial institution. The phrase – and its derivatives – seems 3,846 instances. Certainly, the danger evaluation runs to an astonishing 134 pages. Studying the potential challenges, I’m stunned the financial institution’s administrators need to get off the bed within the morning.
After which there’s the bit on the local weather. Don’t get me fallacious, all of us have to play our half in saving the planet. However over the course of 78 pages, Barclays goes into an enormous quantity of element. Do I actually need to know that £42bn has been lent to properties with an Power Efficiency Certificates score of D?
Stepping again
Warren Buffett claims that buyers don’t must be significantly vibrant to earn cash. He reckons an IQ of 130 will do. Sadly, mine isn’t excessive sufficient to deal with this data overload.
However there’s a hazard of over-complicating issues.
I’ll admit I don’t perceive “franchise-viability danger” or Basel 3.1 requirements.
However I do know Barclays makes its cash by incentivising clients to deposit their financial savings, after which lends this money to others at a a lot greater rate of interest. Easy. I don’t have to learn all 536 pages of the financial institution’s annual report to grasp this.
And impressively, regardless of rates of interest beginning to fall, it managed to extend its internet curiosity margin, in 2024, to three.29% (2023: 3.13%).
I do know the earnings of banks will be risky. And there are not any ensures that Barclays will meet its targets.
However I personal the financial institution’s shares as a result of, once I first invested, I assumed they supplied good worth. Additionally, its development prospects seemed promising. As we speak, my view hasn’t modified. Based mostly on its 2024 earnings per share of 36p, the inventory trades on a historic price-to-earnings ratio of 8.3. That is under the FTSE 100 common.
Encouragingly, its 2024 outcomes beat expectations and the financial institution plans to extend its return on tangible fairness considerably over the subsequent couple of years.
For these causes, I feel it’s a inventory that buyers may contemplate.
However I reckon the time’s come for a re-think. The oldest annual report I can discover for the financial institution is from 1990 — it runs to only 68 pages. If the Chancellor is critical about getting the UK financial system rising once more, possibly she ought to let corporations concentrate on rising their earnings, moderately than their annual experiences?
