Barclays Looks Cheap: Leech

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Feb. 11 (Bloomberg) -- Cormac Leech, Analyst at Liberum Capital, discusses the job cuts coming at Barclays and his subsequent outlook for the company. He speaks on Bloomberg Television’s “On The Move.” (Source: Bloomberg)

Benefit of the doubt?

There is a lot of stuff that is still wrong.

They are trying to tax it.

Barclays is doing the heavy lifting they need to to get the bank into more solid shape.

When you strip out all of the one-off, it is about one billion in the fourth quarter, about in-line line with what they were expecting.

The revenues were a little bit stronger, particularly in the investment bank.

That was offset by higher costs.

In the context of improving the fully loaded leverage ratio up to 3%, which is where they needed to get to by june of this year, they are well on their way to restructuring the balance sheet.

I think that bodes well.

We talk about the culture change.

I see some changes in culture.

We have a ceo that said, i will not take my cash bonus.

And they are offloading from the investment bank.

You cannot turn barclays on a dime, but i think jenkins is a -- he comes from the retail side of the business.

I think he is committed to looking at each division on its own merits on a fully loaded cost basis.

They are starting to fully load the investment bank.

I think jenkins will look at the roe of the divisions and allocate more capital to the higher roe businesses.

You will see it agile.

I think they can do 12.5% core, adjusted roe in a couple of years.

I think barclays is actually very attractive.

What is the main concern investors should have?

Is it that they do not know exactly what they are holding?

Or is it because they will end up owning a bank that has not said anything about litigation yet and we know they will face extra litigation.

That is fair.

It could be larger than expected.

Fx, how big could that be?

You have to put it in context.

They could be $2 billion, $3 billion at the worst-case.

They are restructuring the business.

I think the underlying earnings part will more than offset these temporary one offs.

This seems in line because costs were a little bit higher.

Costs were a little bit higher in the fourth quarter.

I have not dug into the details, but i think that is to be expected.

They inevitably have a lot of one-off regulatory costs, restructuring costs that they have to incur.

Investors should not focus on the short-term details.

They should look directionally, where is the business going?

It is cheaper and good value at the moment.

You are giving him 12 months to turn it around?

People decided 12 months ago that they were going to get the roe up.

There has been a bit of dissolution that the changes did not come through fast as people expected.

I think investors are realistic and the outlook looks attractive.

How does it look compared to its peers?

This is arguably the biggest fortune u.k. bank, but that is very international.

Lloyd's had a fantastic run last year.

It is largely on the bulk of its rating.

Rbs is interesting.

Possibly barclays more than rbs because they have slightly more legacy issues to contend with.

Barclays has a very large investment bank and they have been forced to shrink down.

Rbs is ahead of shrinking but they have other issues they need to address.

They are slightly different.

I would say the pecking order, barclays has the most upside and then rbs and lloyds also looks a little cheap.

Are you concerned about valuation?

The flipside of changing culture is that traders, investment bankers need to get everything signed off.

Is he going to push everything more underground, which means that we have never even found out about these or is it the fact that it makes their life too difficult to make money?

I think they will find a compromise.

I think jenkins is pragmatic.

I do not think he will tighten the regulatory screws so people cannot do their jobs.

I guess that possibly is one of the key risks that they do not err on the side of caution.

Thank you so much for that.

We also spoke to goldman sachs chief executive and we will bring you that interview a little later on.

"the pulse" is coming up about 15 minutes from now.

I am joined by guy johnson.

We will talk about the banks and also other things, cars and a little bit of space.

All kinds of things coming today.

This text has been automatically generated. It may not be 100% accurate.

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