Down 8% in a day! What’s going on with the Barclays share price?

Yesterday, the Barclays (LSE:BARC) share price suffered its biggest one-day loss since Russia invaded Ukraine. It appears that investors were not impressed with the bank’s 2022 results, which were released earlier in the day.

But sometimes, one person’s trash becomes another person’s treasure. I wonder if this is the case with the shares of FTSE 100the third largest bank?

The results were disappointing

When looking at the results, the number 14 continues to grow.

Although total revenue is 14% higher than in 2021, so are operating costs. This resulted in pre-tax profits being 14% lower.

Measure	2021 (£bn)	2022 (£bn)	Change it (%)
Total income	21.94	24.96	+ 14
Operating expenses	14.66	16.73	+ 14
Profit before tax	8.18	7.01	– 14

Analysts had forecast earnings of £7.2bn, which probably explains the dramatic fall in the share price.

Barclays gets 70% of its revenue from outside the UK. Although the dollar appreciated 10% against sterling, the bank was unable to meet its earnings expectations.

And the return on shareholder equity fell from 13.1% in 2021 to 10.1% in 2022. Although above the board’s medium-term target of 10%, the reduction is significant.

The good news?

However, after taking a closer look at the results, I believe there is reason to be optimistic.

Included in operating costs are litigation and action costs. This is £1.2bn higher in 2022, largely due to fines and compensation paid in connection with the issuance of securities in the US. Although this is clearly a failure of internal controls – and does not reflect management – I do not think this will happen again.

The bank’s directors also expect net interest margin (NIM) to rise this year. NIM represents the difference between the interest earned on the loan and the interest paid on the deposit.

NIM forecasts in the UK exceed 3.2% in 2023, compared to 2.86% last year. Based on the current level of UK customer assets of £206bn, this could generate an additional £0.7bn this year.

Also, a sudden fall in the stock price means that the stock is now yielding more than FTSE 100 average. The highest value of 7.25P shares in 2022 is 7.25 US Dollars. If repeated in 2023, this represents a current yield of 4.3%.

bad debt

One area to watch out for is bad loans. With the gloomy economic background, the risk of customers not being able to pay their debts increases.

Every quarter management makes an assessment of the bank’s loan quality. If they believe there is a possibility of non-payment, they will include a disturbance charge on the account. If default risk is assumed to fall, credit (income) is booked.

In common with most banks, Barclays’ disruption costs are rising.

Disability (£m)	Q1 2021	Q2 2021	Q3 2021	Q4 2021	Q1 2022	Q2 2022	Q3 2022	Q4 2022
(Charge) / Credit	(55)	797	(120)	31	(141)	(200)	(381)	(498)

What do I think?

Man, I think the dramatic fall in the Barclays share price is a bit of a market over-reaction. It is now close to where it was six months ago.

With outstanding charges in 2022 of around £1bn, and rising interest rates across the globe, 2023 should be an even better year for the bank.

However, I already have a stake in it Lloyds Bank. And, I believe in the virtues of diversification. For these reasons, I would not buy shares in Barclays.