A woman strolls by a Barclays Bank branch in London, England, on February 23, 2022. Photo: swissinfo
Barclays has made headlines with its announcement of a £750 million ($957 million) share buyback and an upgraded earnings forecast, despite facing a 9% drop in profits for the first half of 2024. The British bank's updated projections reflect its strong performance, especially in trading, which has helped counterbalance its overall profit decline.
The bank now expects a return on tangible equity (ROTE) of over 12% by 2026, up from the previous target of over 10% for 2024. Barclays also aims to achieve an annual income of £30 billion by 2026. This optimistic outlook is supported by its recent upswing in trading income, which has been a significant factor in offsetting the profit dip.
Barclays is joining other major banks like HSBC and Standard Chartered in a sector-wide trend of returning substantial capital to shareholders. The bank plans to distribute at least £10 billion in dividends and share buybacks between 2024 and 2026.
Despite a broader market downturn affecting its share price, which saw a slight dip of 1.5% earlier in the day, Barclays’ stock has soared more than 50% this year. This surge follows CEO C.S. Venkatakrishnan's strategic shift in February, focusing on expanding its core UK lending business while reducing its reliance on higher-risk investment banking.
In particular, Barclays’ investment banking division has been impressive. The bank reported a 10% increase in income for the second quarter, driven largely by its equities business. Equities income rose by 24%, outpacing the gains of rivals like Morgan Stanley, Goldman Sachs, and JPMorgan. This growth in equities has been bolstered by Barclays’ market share gains in prime brokerage, a lucrative area of financial services.
However, not all areas of the bank are performing equally well. Barclays saw a 3% decline in revenues from fixed income, currencies, and commodities (FICC), though investment banking income from deals jumped by 44%. Additionally, the return on tangible equity (ROTE) for Barclays' UK corporate bank dropped significantly from 27.3% to 16.6%, and the unit’s pretax profit fell by 36% with expenses rising by 15% compared to the same period last year.
The bank's UK retail banking sector also faced challenges, with revenues down by 4% due to intense competition and pressure on mortgage margins. Looking ahead, Barclays is adjusting its European operations, focusing on areas where it has scale and considering the sale of non-performing assets. The bank recently announced the sale of its German consumer finance business to an Austrian bank and is in talks to offload its Italian retail mortgage portfolios linked to Swiss francs.
As the Bank of England is expected to cut its base rate by 0.25% later today, this move could lower debt costs for borrowers but might impact banks' interest income. Barclays has prepared for this possibility with hedging strategies and has raised its 2024 net interest income forecast to £11 billion from £10.7 billion.
