FINANCIAL ANALYSIS

Financial Analysis - Comparing With Previous Years for Barclays and With RBS



Financial Analysis - Comparing With Previous Years for Barclays and With RBS

Barclays PLC

Barclays functions in 50 countries nationwide and utilizes 135,000 people. In United Kingdom, Barclays has 724,000 business concern clients, numerous of which are little endeavours or business commence-ups. Barclays offers a special service for these, called Local Business. To set up a business concern is a challenge. It involves the entrepreneur to make key conclusions. Barclay's offers affirm with this procedure.

Barclays PLC

Figure 1

Analysis of Ratios considering Economic Factors:

ROCE for first 3 years (2005-2007) reflects the 2 digit positive growth however it is diminishing year on year basis. It went further down in the year 2008 and got negative in the years 2009 that is very bad condition for any companies as negative growth means reduction in the capital because of losses. Current Assets ratio is about the current assets over current liabilities that means for every £1 current liabilities bank has £0.02 liquid assets to pay. Cost: Income ratio tells about the percentage of cost over income. Low cost leads to high margin. In the year 2006 it is the 5 years lowest that reflects better margin than the other years.

Reasons behind the down Fall of Barclay's Profitability

Acquisition of Banks became as it was loss making company and it was expected to incur £11bn in the year 2009. Impairment loss(16,673) in the year 2009 that is approx 5 times more than the previous year and approx 8times more than the other previous years.

Economy Crisis, Year 2008 & 2009 was the time of World Economy Crisis. Its reflection can be seen on Economic data -GDP, Inflation rate & Interest rate.

Fig2 the GDP growth rate curve and Inflation rate curve speak about the poor economic condition.

Negative GDP and high inflation rate affected Consumer price Index, product prices went up. Under performance and heavy losses in the market also led the unemployment.

Figure 2

Current Economic Overview

Current GDP is 0.8%, Inflation 3.1 and Interest rate is 0.5% which is expected to remain same for next 2yrs.As per Bank of England's inflation report on 10th Nov 2010 forecasts the GDP growth of 2.2% by the next year and then rise to 3% by 2012. While Consumer Price Inflation is expected to fall below its 2% target by 2013 and it is likely to reach 3.4 per cent halfway through 2010 and then fall to 2 % a year later.

Banks are still finding difficult and are not comfortable to lend money to SMEs as there is fewer and less credit worthy. SMEs are also much depend on Trade credit that they get from the suppliers. Trade credits are twice the flow of bank lending and SMEs bills payable

Consumer Confidence Index

Figure 3

As per the National wide consumer confidence index reflects the decrease in sentiment during October. Consumer Expectation Index is the lowest level for 2yrs. Decrease in sentiments comes when consumer is not sure about the economy growth and the employment ...