UBS’ Top Tech Based Disruptive Stocks For 2030: Top 29 Stocks

18. Barclays PLC (NYSE:BCS)

Number of Hedge Fund Holders In Q2 2024: 20

Barclays PLC (NYSE:BCS) is a well known global British bank. One of the largest banks of its kind, the firm had a whopping $1.6 trillion in assets as of its latest quarter. Crucially for Barclays PLC (NYSE:BCS), the current environment particularly in the banking industry might be perfectly suited for it. Take note of the fact that since their peak in January 2022, Barclays PLC (NYSE:BCS)’s shares have gained a mere 9%. In fact, were it not for the stock’s 76% gains since mid February 2024, it would be down by 38% since the peak. So, what’s driving this recent optimism behind Barclays PLC (NYSE:BCS)? Well, one factor is the bank’s income. As of H1 2024, £6.3 billion of the bank’s £13.2 billion in net income came via investment banking. Investment banking thrives in a low rate environment, and since the Fed’s rate cut in September, the stock has gained 10.29%. Yet, there are some potential tailwinds since Barclays PLC (NYSE:BCS)’s exposure to the UK economy could see risks of default by some loans given by the bank.

During the Q2 2024 earnings call, Barclays PLC (NYSE:BCS)’s management explained how it’s preparing for uncertainty in interest rates:

“We have also updated our UK rate expectations for 2024, and now assume one base rate cut to 5% by the end of the year. Together, these trends mean that we have increased our 2024 guidance for Group NII, ex-investment bank and head office, to circa GBP11 billion for the full year, up from GBP10.7 billion. Within this, NII guidance for Barclays UK increased from $6.1 billion to circa $6.3 billion, excluding the Tesco Bank acquisition. A further UK rate cut to 4.75% towards the end of the year, which is currently assumed in the latest consensus, would not materially change NII this year. Moving on to the structural hedge on Slide 10. As a reminder, the structural hedge is designed to reduce volatility in NII and manage interest rate risk. As rates have risen, the hedge has dampened the growth in our NII, and in a falling rate environment, we will see the benefit from the protection that it gives us.

The expected NII tailwind from the hedge is significant and predictable. GBP11.7 billion of aggregate gross income is now locked in over the three years to the end of 2026, up from GBP9.3 billion at Q1. We have around GBP170 billion of hedges maturing between 2024 and 2026 at an average yield of 1.5%. As we said in February, reinvesting around three quarters of this around 3.5% would compound over the next three years to increase the structural hedge income in 2026 by circa $2 billion versus 2023. In response to greater stability in customer and client deposit behavior, we have slightly increased the average duration. Given the high proportion of balances hedged and the programmatic approach we take, we are relatively insensitive to the short-term impact of potential rate cuts.”