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Introduction

International finance mainly recognized as a nation-wide business transaction among several nations in terms of transferring of goods and services, financial transactions, foreign exchange transactions (Frieden, 2016). There are numerous organizations that work at international stage or are carried out as a result of changes in the global financial system. this context covers the effect of changes throughout the global financial climate on the company's performance. As well as key aspects on funding and risk assessment of corporations. The report is framed to execute the financial aspects of Barclays bank. The challenges which are faced by organisation and how it impacted the operations of entity defined in this report. financial analysis techniques are applied in order to measure the complex business problems in international finance. Critical evaluating and thinking process is used to concentrate towards suggested models and sections.

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PART 1

a) Developments in the international or global financial environment and its impact upon Barclays bank

Changing in international financial derivatives: The development seems to be the ongoing growth of both the stock market on the global financial system. The transition involves expanded use with the market for derivative (Frisari and Stadelmann, 2015). Has also increased the market forces of diverse derivatives. Because of these developments, new businesses on the international market could access and minimize the risks of financial instruments. Even after such positive signs, Throughout the second half, Barclays recorded a decline in sales of than 80%. The managing director stated banking consumers and investors had a "degree of caution," that kept further cash in their deposits. Corporate clients were hindering on consolidation, mergers and share market recapitalisations from important decisions. "The confusion organisation have about Brexit obviously has an economic impact," Staley said. Jes Staley, its chief executive, informed of both the effects of UK economic uncertainty over the coming year.

The new announcement by Barclays outweighs the additional £ 900 m that RBS put to rest on while competitor Lloyds could announce a £ 1.8bn provision if it reports its third-quarter results. Staley applauded the wealth management unit's results, that in the third quarter made especially post-tax profits of £ 882 m, up 77% during the same time in 2018. Barclays was under strain from shareholder activist Edward Bramson to restrain his competition of retail banking, that critics claim has absorbed much funds when providing stockholders less return on investment.

Enhancing the integration and globalisation in financial market: It is one of the latest changes throughout the global financial climate dimension. As regards it shifted, industry liberalization has also been enhanced and technological advances was improved and the communications infrastructure has also been strengthened (Kay, 2018). New companies can expand their activities on a global level due to this shift in the global market in very moderate manner. However, quicker access to the foreign marketplace allows for better allocation of capital. Additionally, enhancements are being made to strategies that can help small and new businesses make efficient improvements. There were three major challenges stood in front of Barclays as climate variations extenuation investment, climate change adaptation investment and strategic diversification and revolving business models. All these three challenges were perfectly managed and controlled with effective change management.

Barclays is the first UK financial bank to deploy a Green Home Mortgage facility to its clients. A new retail commodity which awards consumers from retail banking to buy a power-efficient residence. Barclays provides a lower rate (compared to both the comparable key mortgage area) for clients purchasing a new build house classified EPC A or B.  This scheme assists the banking sector to explicitly compensate people for trying an eco-friendly home, adding real value to their spending on electricity bills. Barclays is capable to issue a UK green mortgage worth € 500 m for the very first time, the profits of which are utilized to fund and remortgage such green mortgages. As resulted the price of shares of Barclays plc increased by

b) Essential elements of MNE’s international financial and risk management strategy

Source of finance: There are two type of financial requirements occurs in a business as long term and short term. Those same reports play a significant role in meeting the financial need. However, the origin of funding can also influence the financial results of businesses. It's because if a business does not have enough resources to finish its operations, they won't even be able to maintain this in a competitive market (Vaubourg, 2016). At the other hand, if companies pay economic support for higher costs, it could also affect their future growth. Financial markets are becoming increasingly important as just a sources of corporate financing and expenditure, going to continue its change in previous decades back from credit markets. Throughout Europe, bond market expansion has absorbed 90 percent of the fall throughout bank credit since after the financial crisis. These trends will continue as the only non-US investment bank in both London and New York to operate on a scale. Mortgage borrowing to corporations has decreased by 14 percent compared to GDP over the past few years. Around the same period, capital market investment has been increasing, to private debt markets which is growing by 75% over the past few years-and we are a top four participant in debt financial markets.

Dividend policy: It is an another factor that can influence financial results of companies. Essentially, in terms of paying dividend to investors, the phrase dividends plan can be interpreted as a rule that is linked to a structure. Here, it is important to understand that if dividends policy does not favour investors, they would not be interested in investing in the potential period. And also if the earnings policy is greater in order to make stakeholder payments, it can result in business losses (Khan, 2015). It is therefore important to understand that pay out policy must be in accordance with both investors and the firm's interest. Depending on bank's good equity base, an increase of the dividends to 6.5p, as well as the repayment of costly subordinated bonds from the financial recession, it is observed that a return of about £ 1.8bn of equity in 2018. Its 2018 full year dividend of 4.0p for every share will also be compensated on 5 April 2019 to stockholders for whom the names were on the Register of Participants at the end of business on 1 March 2019. With a maximum of 2.5p per normal stock in the 2018 quarter-year dividends payable in September 2018, the overall pay out for 2018 is 6.5p (2017: 3.0p) per ordinary share. Dividends for the 2018 half year and full year amounted to £ 768 m (2017: £ 509 m). As the fundamental income production, £ 4.2 billion is more than balanced by £ 2.1 billion in lawsuits and fines for actions. As the financial institution addressed legacy issues, £ 1.7bn was compensated and anticipated for normal dividends and AT1 discounts, and £ 1.0bn from investment tools salvation.

c) Evaluation of financial ratios and accounting ratios.

Evaluation of financial performance of an entity is an essential term in order to meet stakeholders and investors objectives. In organisational context evaluation of financial performance is measured on the basis of calculated financial ratios. Financial ratios are considered parameters that helps to calculate the performance of organisation (Ntuli, 2017). Financial figures are collecting form balance sheets, income statements and formed in a synchronised format to figure out financial ratios. Financial performance of Barclays will be analysed around four accounting ratios as profitability, Liquidity, efficiency and investment for last two years.

Profitability

As a consequence of careful control of default risk, the strengthened performance benefited from a significant reduction in loss as well as the advantage of better macro forecasts throughout the year (Fernández, Paz-Saavedra and Coto-Millán, 2019). Net income at 9.4p, down from either a 10.3p drop in 2017, provided a better image.

Particulars

2018 £m

2017 £m

Net profit

2372

-894

Net sales

21136

21076

Calculation

2372/ 21136 *100

-894/ 21076 *100

Gross profit ratio

11.22%

-4.24%

It is observed that Barclays plc’s profitability is transforming from the last year itself, the organization's statutory income before tax amounted to £3.5bn, up 1% on the previous year (since covering disputes and damages during the year of £2.2bn) resulting in a yield on net assets of 3.6%, up 7.2% on the previous year. form the above financial evaluation it is resulted that the net profitability increased form -4.24% to 11.22%. After having the mortgage crisis, the organisation become able to manage the market effectively.

Operating profit margin

Particulars

2018 £m

2017 £m

Operating profit

3494

3541

Net sales

21136

21076

Calculation

3494 / 21136 *100

3541 / 21076 *100

Operating profit ratio

16.53%

16.80%

Form the above calculations it is analysed that the net operating margin slightly changed from the last year. the reason behind the deficiency is enhancement in operating expenses. Provisions for litigation and conduct expenses increased by £1000 million. Due to this operating margin was reduced by 0.27%.

Liquidity

Credit risk as well as liquidity risk were exempt in hedge reporting. As far as some of the hedge reporting partnerships of the Barclays Group are concerned, the levered product and short selling method always happen due to both the complex nature of hedge accounting and risk assessment policy (Mugarura, 2015).  LIBOR is considered to be the predominant interest rate risk, and hedged items therefore change the fair value on a fully proportionate basis with reference to this risk. Bank is suffering from low liquidity due to recent financial fluctuations. Loans are the prime commodity at which a fixed amount circulate in bank with significant rate of interest. Board of directors expected that 70% of cash will be circulated monthly but far from the expectancy organisation is only being able to get 30% of liquidity. That states the lower result in terms of liquidity. The reason behind the low liquidity is low interest on short term loans compare to other short term loans and advances.  

Return on equity

Particulars

2018 £m

2017 £m

Net income

1394

-1933

Shareholders’ equity

63779

66016

Calculation

1394 / 63779 * 100

-1933 / 66016 * 100

Return on equity ratio

2.19%

-2.91%

An effective growth aspects were recorded in terms of return on equity figures. The company produced potent year-on-year income growth and decent equity returns. Team returns on productive equity (RoTE) is 8.5 percent, 2.9 percent higher than the previous year on track to reach the company's 2019 and 2020 goals. Organisation ratio of Common Equity Tier 1 (CET1) is 13.2%, at the target end-state level of c.13% and form the above results it is predicted that organisation will achieve the predicted growth aspects. Except for arbitration and conducting products, profit until tax has been £ 5.7bn, up 20 percent year and produced an 8.5 percent transfer on concrete equity, just shy in organisation 2019 and 2020 location rates (Kalbaugh, 2016). Net income was 21.9p, up on the previous year's 3.5p loss. Considering the key aspects in terms of combining the financial results it is evaluated that key stake holders are retaining 5.5% rights in common equity.

Return on Assets

Particulars

2018 £m

2017 £m

Net income

1394

-1933

Total assets

1133283

1133248

Calculation

1394 / 1133283 * 100

-1933 / 1133248 * 100

Return on assets ratio

0.123%

0.17%

From the above evaluation it is resulted that the return on assets were decreased for 2018 comparative to last financial year. Deduction in acquiring fixed assets and run down of non-core units is considering major reason of decreased return on assets ratio. Barclays disregarded £90bn of risk weighted assets during the last year. this action brings the ratio down by 0.05%. Corporate investments and operations run down in subsidiary states may decrease the ratio more significantly.

Return on Equity

Particulars

2018 £m

2017 £m

Operating profit

2372

-894

Capital employed

63779

66016

Calculation

3494 / 63779 *100

3541 / 66016 *100

Return on capital employed ratio

3.7%

-1.36%

From the above evaluation it is analysed that return on equity for the year 2018 and 2017 calculated as 3.7% and -1.36%. the reason of increased return on equity is recognised as the change in capital market is predicted the reason of increased return on capital introduced in investment funds and bonds. Some of the shareholders reinvested in Barclays and showed a positive interest towards enhancing the market growth and development in near future.

Earnings per share

2018

2017

2373

17133

1894

17060

0.138

0.111

Price per Earning ratio (PE)= Market Share price / Earnings per share

2018

2017

150.52

   9,4

203.40

 (10.3)

16.1

(19.7)

As the above financial evaluation of Barclays states the mixed results in terms of earning price. The per earning price is calculated as £16.1 and -£19.7 subsequently for 2018 and 2017. It is recorded during the financial crisis capital structure get rigid but the management was ready to evolve and reform the capital structure of business with a critical approach of investing in less risk holding assets and liabilities. the variations among fluctuations was tremendously made structure with proper structure and evaluative control. At last, organisation be able to present the strong market hold throughout the years and adapted the global changes in sustainable growth direction.  

Dividend cover= Net Profit/ Total dividend declared

2018

2017

2372

994

(894)

 924

2.38

(0.968)

Explanation: Dividend cover means the ability of an organization to pay the dividend to the shareholders out of the profits it has earned during the period. So, we can observe that from 2017 to 2018, dividend cover has been increased from -0.968 to 2.38, which means the capacity of company to give dividends has increased. 

Dividend Pay-out Ratio= Total Dividends / Net profit & Earnings per share / Dividend per share

2018

2017

994

2372

924

(894)

0.419

(1.033)

Explanation: This ratio indicates that how much dividend is actually paid by the company during the period when compared to the net income. So, from 2017 to 2018 the company's dividend playout has increased and in 2018 the dividend pay-out ratio is 0.419 which is higher than 2017 which is -1.033.

Dividend per Share=       Total dividend paid / Shares outstanding (share in issue)

2018

2017

 994

17133

924

17060

0.058

0.054

Explanation:  Dividend per share reflects the total dividend paid by the company divided by the shares outstanding. Here, we can see that there is just 0.004 increase in dividend per share from 2017 to 2018 i.e. from 0.054 to 0.058. So, in 2018 the company has paid out 5.8% to the shareholders.

Conclusion

Based on above project study, this can be inferred it is important for businesses to analyse the global financial climate because it can impact their financial performance. The report cites two latest changes in the global financial climate that influence the financial results of the selected organization. Included are key components of international finance, such as funding origin and dividends strategy.  The other part of both the project study suggests on the evaluation of the selected firm's quality by measuring various proportions like productivity ratio, efficiency proportion and much more.

References

  • Frieden, J., 2016. The governance of international finance. Annual Review of Political Science. 19. pp.33-48.
  • Frisari, G. and Stadelmann, M., 2015. De-risking concentrated solar power in emerging markets: The role of policies and international finance institutions. Energy Policy. 82. pp.12-22.
  • Kay, K., 2018. A hostile takeover of nature? Placing value in conservation finance. Antipode, 50(1), pp.164-183.
  • Vaubourg, A. G., 2016. Finance and international trade: A review of the literature. Revue d'économie politique. 126(1). pp.57-87.
  • Khan, M. M., 2015. Sources of finance available for SME sector in Pakistan. International Letters of Social and Humanistic Sciences. 47. pp.184-194.
  • Ntuli, M. G., 2017. An evaluation of bank acquisition using an accounting based measure: a case of Amalgamated Bank of South Africa and Barclays Bank Plc. Banks and Bank Systems. 12(1). p.160.
  • Fernández, X. L., Paz-Saavedra, D. and Coto-Millán, P., 2019.

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