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Barclays, ‘the cheapest bank in the world’, draws investors

Private investors snap up Barclays shares, while a few high-profile fund managers move in too.

 
Barclays, ‘the cheapest bank in the world’, draws investors

Bargain-hunting private investors have snapped up Barclays (BARC.L) shares since the bank was exposed for manipulating inter-bank rates, according to data published by stock brokers.

Barclays, which last Wednesday became the first bank to be fined over the rigging Libor rates, was by far the most popular ‘buy’ among shares snapped up by TD Invest clients in the week ending Monday 2 July. It accounted for nearly half of the top ten trades recorded by the company, with a buy:sell ratio of 4.7:1.

Platform Selftrade reported the same trend, with buys of Barclays shares far outstripping any other. Barclays was also the most popular share to sell, but with less than a third of the volume of ‘buy’ trades.

Several high-profile investors have already spoken out in favour of the shares in recent days.

Lee Freeman-Shor, manager of the Skandia Best Ideas Fund, which itself invests in portfolios run by ten managers, said two of these sub-funds had been buying in Barclays, seeing the fine as a ‘one-off hit’.

‘There are many positives in that the stock looks to have been oversold – as seen in the way the share price rose on Diamond’s departure. They are also already dealing with the US and UK regulators which is a sign that the process may be contained,’ he said.

David Cumming, head of UK equities at Standard Life Investments, told Citywire how he remained bullish on the banking sector in spite of the Barclays fine, pointing to low valuations and a positive outlook for the company.

Hedge fund manager Crispin Odey has been topping up his existing holdings in the shares, according to Reuters. ‘It's the cheapest bank in the world’, said Odey, as he bought another £10 million worth of shares at around 160 pence on Tuesday.

However, other longer-term sceptics of Europe’s banks, like Mark Burgess of Threadneedle and Henderson’s Stephen Peak, have reiterated their doubts. Barclays faces big problems: the scaling back of Barclays Capital, the investment banking division that former chief executive Bob Diamond used to run; exposure to Spain and the troubled eurozone; and the threat of legal action from investors over the Libor fixing scandal. 

Oriel Securities says the shares trade at just 0.4 times book value but downgraded the bank to 'hold' from 'buy' this week, saying the negative factors 'will constrain a rerating'.

The shares were little moved when the joint fine of £290 million from the US and UK authorities was announced, but then fell sharply the following day. They are down some 15% since the notice of the fine during which time chief executive Bob Diamond and Chief operating officer Jerry del Missier have both resigned. Shares are now trading at 165.6p and have lost three quarters of their value in the past five years.

16 comments so far. Why not have your say?

Nigel James

Jul 05, 2012 at 16:56

Who's talking this up? ‘the cheapest bank in the world’? Maybe. Doesn't mean it can't get cheaper, though; indeed it was quite a bit cheaper (around 132) only last September. Why is it worth more now than it was then? Now it's rudderless it might well go back there, or lower. Who knows? In this croupierless casino anything can happen and probably will...

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Michael Brooks

Jul 05, 2012 at 17:04

I wouldn`t mind another rights issue so I can buy a few hundred more.

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Hotrod

Jul 05, 2012 at 17:40

I don't quite get it. TD invest reported a buy/sell ratio of 4.7 : 1 Does that mean that TD Invest were selling short? If so, then they expect the shares to fall further.

In any event I would not describe people who shoot crap as "Investors"

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Westwinds3

Jul 05, 2012 at 17:51

I am not sure I understand this. Presumably for every share bought a share is sold. In which case it would imply that small investors are rushing to buy and professional investors are happy to sell. Hmmm...

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Adam Murza-Murzicz

Jul 05, 2012 at 17:51

The shares are cheap - until the next scandal comes to light. And as sure as eggs are eggs there is another one (at least) in there.

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Rob Walker

Jul 05, 2012 at 21:15

I put 10% of my portfolio into Barclays at 161p last / this week. It's a good business with bad market sentiment. After a couple of good results (which are more or less guaranteed given recent form) the shares will bounce back and I'll sell somewhere between 250 - 270 p. Ignore the hype, just look at the numbers, they are irrisitable.

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joseph o neill

Jul 05, 2012 at 22:39

What are you saying RW, that you know more than the market does & its just market sentiment rather than future earnings?

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Peter Gough

Jul 05, 2012 at 23:20

Cheap but for a reason buy after the next CEO kitchen sinks perhaps?

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Michael Brooks

Jul 06, 2012 at 01:39

RW is right, the shares are dirt cheap at present. This is a good sound profitable business, and the shares look to have good `bouncebackability`.

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Croesus9

Jul 06, 2012 at 10:00

They're cheap based on NAV - but who knows what is to come?

I've never been a fan of the cowboy/barrowboy culture that spawned Bob Diamond and his ilk. Having said that, the lowballing saga has been ridiculously overplayed. They obviously thought that they were getting a nudge/wink from Threadneedle St and/or Whitehall (which has been going on since time immemorial). And who actually suffered as a result of the minimal reduction in Libor, which was a fiction anyway?

Oh for those happy days when they were a family bank (which I was proud to be a part of for 30 years). Only time will tell whether a new CEO, and the lessons of the last few weeks, will change the culture at Barclays for the better. A reasonable punt at these prices yes, but not one for widows n orphans....yet. But I'm holding my modest pot..

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Tarqs1

Jul 06, 2012 at 14:17

@ Joseph O'Neill that is exactly right, it is market sentement, not the true value of the stock, just look at the NAV.

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Hotrod

Jul 06, 2012 at 16:26

@Tarqs1

They said the same about Land Securities. Those shares were trading at a discount to NAV for years. The yield was fantastic. But when the credit crunch started to bite, they went straight down the pan!

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Ian 1912

Jul 07, 2012 at 10:46

Does this short term story mean that investing in Barclays Defensive autocall E3 yielding 9.5% ( potentially) is just too risky? IFA man says "no"!

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Ron

Jul 07, 2012 at 19:05

It's worth bearing in mind that Barc is a high risk high reward share.

Their high level of leverage in Europe makes them better suited to gamblers.

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BILLFISH

Jul 07, 2012 at 23:03

Not such a good business when you consider the lunacy of their current undertaking to transfer all their stockbroking,ISA and SIPP customers over from the current arrangements where their cash is held in client segregatedaccounts to being customers of Barclays bank.

This means that the cash in these accounts will be added to any other Barclays accounts when calculating the £85,000 limit for the investors compensation scheme, leaving any excess over this figure as unsecured creditor status in the event that the bank ends up being liquidated.

Not the move of a smart bank, as individuals with subsatntial holdings in SIPPS, stockbroking accounts and ISA accounts will be encouraged to either leave Barclays or move some of their accounts to other providers if they wish to retain the flexibility to hold large cash balances in a combination those accounts (as markets may dictate) without the risk of exceeding the ICS limit.

Not the move of a smart bank looking to attact good business and not a good pointer to its future performance.

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chazza

Jul 09, 2012 at 12:33

BILLFISH, I agree wholeheartedly. This was a move designed to boost Barclays profits, is clearly not in the interests of customers, and should be speedily reversed if Barclays wants to keeps its SIPP and ISA customers. But when was Barclays ever focused on customers' interests? The bank needs a thorough-going change of culture and orientation, and it doesn't come soon, that elevated book value will be but a distant memory.

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