Shares in Barclays jumped on Thursday as the UK lender swung back to profit after reporting losses in the final three months of last year amid its efforts to restructure the bank’s operations.
The share price of the UK banking giant Barclays surged nearly 5% after the lender reported higher than expected profits for the first three months of this year, as it carried out an ambitious plan to get back into the investors’ good books.
The pre-tax profit was £2.3 billion (€2.68 billion), slightly more than the expected £2.2 billion, however, down from £2.6 billion a year ago.
The group income was also slightly above expectations, £7 billion (€8.16 billion), but again, a drop of 4% year-on-year, while the operating expenses increased by 2% to £4.2 billion (€4.9 billion).
“Barclays has shown stable rather than dynamic growth over the quarter, beating expectations on most measures but with some question marks over its US operations,” said Richard Hunter, Head of Markets at Interactive Investor.
Barclays’s Private Bank and Wealth Management income increased by 20%, and there was a slight increase at the US Consumer Bank but the rest of the lender’s operations reported declining revenue.
Hunter added that, among others, Barclays’s overall revenues were impacted by lower income from mortgages, and a 7% decline in revenues from its investment bank operations, which accounts for around half of total group revenue.
“For the group as a whole, the balance sheet remains in strong shape and the key metrics for the most part were progressive. The capital cushion, or CET1 ratio was also stable at 13.5%.”
The challenges ahead
Faced with declining share prices over the last eight years, the lender is on the path to recovery. It recently announced** a reorganisation of its operations**, cutting costs and pledging to hand £10 billion (€11.67 billion) back to shareholders by 2026.
In terms of corporate activity, the group is looking to consolidate some of its more profitable markets.
“We are focused on disciplined execution of the plan that we presented at our Investor Update on 20th February,” said Coimbatore Sundararajan Venkatakrishnan, Group Chief Executive, in the latest earnings report. He added that the return on tangible equity was 12.3% in the three months and is still expected to be more than 10% for this whole year. “We have now announced the sale of our performing Italian mortgage book and are investing in our higher returning UK consumer businesses, including through the expected completion of the Tesco Bank acquisition in Q4 24.”
Investors were convinced and bank’s share price started climbing after the announcement.
“The longer-term outlook continues to attract investors,” added Interactive Investor’s Richard Hunter, saying that the share prices climbed 24% over the last year, including a strong rally of 42% over the last six months.
“The overall numbers suggest that Barclays UK was possibly the strongest performing unit in terms of improved contribution and the bank clearly has designs to capitalise on this strength.”
