- Quarterly earnings beat forecasts
- Investment bank outperforms
- Full-year profit outlook raised
Like its rivals HSBC (HSBA) and Société Generale (GLE:EPA), UK lender Barclays (BARC) enjoyed a strong first quarter thanks to the increased volatility in stock and bond markets which powered gains in its investment banking business.
Barclays shares, which have gained more than 45% in the last year against a rise of just 4% in the FTSE 100 index, added another 5p or 1.7% to 303p.
A POSITIVE FIRST-QUARTER SCORE CARD
Total income for the first three months of the year was £7.7 billion, up 11% on 2024, driven by a 16% increase in investment banking income to £3.9 billion or almost half of the group total.
At the same time, the UK retail bank posted a 14% increase in income to £2.1 billion helped by strong demand for mortgages and loans.
Return on average tangible equity (ROTE) increased to 14% against 12.3% a year earlier, while net asset value per share rose to 372p from 357p a year earlier.
Operating costs were reduced by 5%, leading to a reduction in the cost-to-income ratio from 60% to 57% and a 26% jump in EPS (earnings per share) to 13p against 10.3p previously.
The only area of concern was an increase in the loan loss provisions, which was partly down to ‘elevated US macroeconomic uncertainty’, but the bank insisted trends across its loan portfolios overall showed no signs of deterioration.
Chief executive C.S. Venkatakrishnan declared himself ‘very pleased with our performance, which represents another strong quarter of execution’.
He added: ‘Our high quality, diversified businesses, together with proactive risk, capital and liquidity management and a robust balance sheet, position us well to support our customers and clients and deliver strong risk-adjusted returns in a wide range of macroeconomic scenarios.’
MEDIUM-TERM TARGETS CONFIRMED
For the full year, the bank is aiming for a return on tangible equity of around 11% and a cost-to-income ratio of 61%, both of which are below the levels of the first quarter, but it has raised its net interest income target from £12.2 billion to £12.5 billion thanks mainly to strength in UK lending.
For 2026, return on tangible equity is seen above 12% and the cost-to-income ratio is seen more in line with this year’s first quarter while group income is estimated at £30 billion.
More importantly for shareholders, the bank still plans to return at least £10 billion of capital between 2024 and 2026 in the form of dividends and buybacks is still in place, which equates to just under a quarter of its current market cap.
