Banking group Barclays (BARC) gained 3.9% to 176p as it reported second quarter results that exceeded market expectations. It also announced an interim dividend of 2p, and a share buy back of £500 million.
Barclays has reported a pre-tax profit of £5 billion on net income of £12bn during the first six months of 2021. Both reported EPS (earnings per share) of 12.3p, and the interim dividend of 2p were ahead of consensus expectations.
The former by an order of magnitude given that the consensus EPS figure was 7.9p. The group also intends to complete a £500 million share buy back in the second half. This equates to approximately 2% of the market cap, and is in addition to the £700 million already completed in H1.
From a divisional perspective Barclays UK and CIB (Corporate and Investment Banking) were the star performers. Consumer, Card and Payments recorded a disappointing performance.
KEY DRIVERS OF PERFORMANCE
The two key drivers of performance within CIB were investment banking and equities where their fees increased by 27% and 38% respectively during the second quarter.
Barclays results have been flattered by a larger than expected net provision release during the period.
The £0.8 billion release that has been justified on the grounds of an improved macro-economic outlook is a one-off. It is questionable whether future performance can be sustained in the absence of this non-recurring item.
The group has upgraded guidance and now expects to achieve a tangible return on equity of greater than 10%. Consensus was 9.3%.
Shore Capital analyst Gary Greenwood commented: ‘Overall, a very encouraging update which we expect will drive further consensus forecast upgrades.’
(By Mark Gardner)
