Barclays announces £750m share buyback

London — Barclays announced a new £750m share buyback and upgraded its longer-term earnings guidance on Thursday, driven in part by an upswing in trading income that offset a 9% profit fall over the first half of 2024.

The British bank now expects to make a return on tangible equity (ROTE) greater than 12% by 2026, compared with a 10%-plus target in 2024, and to generate annual income of £30bn pounds in 2026.

In keeping with a sector-wide trend also seen at HSBC and Standard Chartered, Barclays also said it planned to return at least £10bn of capital to shareholders between 2024 and 2026 through dividends and share buybacks.

Its share price has surged more than 50% so far in 2024, after CEO CS Venkatakrishnan unveiled a major strategy reboot in February to grow the bank's core UK lending businesses at the expense of its higher-risk investment bank.

But despite heavy investment in corporate and retail banking, results in Barclays’ investment bank still stood out.

A 10% rise in income over the second quarter, driven by the equities business, helped Barclays echo the bumper returns from trading reported in July by Wall Street rivals.

Barclays said second-quarter equities income rose 24%, beating the 18% increase at Morgan Stanley, the 7% gain seen at Goldman Sachs and JPMorgan's 21% rise.

Shareholder Richard Marwood, head of income at Royal London Asset Management, described Barclays results as “pretty solid”, saying it was one of the few major banks still trading at a discount to its book value.

Prime brokerage

The bank’s strong performance in equities has been partly fuelled by market share gains in the lucrative world of prime brokerage, Reuters reported last week.

Barclays also reported that fixed income, currencies and commodities revenues fell 3%, while investment banking income from deals rose 44%.

The Bank of England (BoE) cut interest rates from a 16-year high on Thursday. Governor Andrew Bailey — who led the 5-4 decision to lower rates by 0.25% to 5% — said the BoE’s monetary policy committee would move cautiously.

Most banks have planned ahead to mitigate the effect of falling rates with special hedging arrangements aimed at smoothing out the potential hit.

Barclays actually lifted its forecast for 2024 net interest income to £11bn over the year, from £10.7bn.

But returns remain under scrutiny. The ROTE at the bank’s UK corporate bank tumbled to 16.6% compared with 27.3% a year ago. The unit’s pretax profit sank 36% and expenses jumped 15% compared with the first half of 2023.

Barclays also reported that revenues fell 4% in its UK retail bank, as competition to lend intensified.

“Among the culprits for the lower numbers were mortgage margin pressure and adverse deposit dynamics as customers sought higher rates elsewhere,” Interactive Investor head of markets Richard Hunter said.

Barclays is paring European businesses where it lacks scale, and said it remained in discussions to sell its remaining non-performing and Swiss-franc-linked Italian retail mortgage portfolios.

The bank said on July 4 that it would sell its German consumer finance business to an Austrian bank for a small premium to net assets. 

Reuters