- Top line beats consensus
- Profit 24% above estimates
- New £750 million buyback
In line with its rivals, Barclays (BARC), the last of the Big Four high-street banks to report, pleased investors with its second-quarter update although there was less of a reaction to its increased guidance or latest buyback.
The shares opened up 8p or 3.4% at 241.8p but those early gains faded leaving the shares up just 3p or 1.3% by mid-morning.
INVESTMENT BANK BOOST
For the three months to the end of June, Barclays beat estimates at both the top and bottom line thanks to better income and lower costs and impairments.
Total income was £6.32 billion, a 1% increase on the previous year, largely thanks to a better result at its investment banking unit – in particular the equities side – which grew revenue by 10% to £3 billion.
Private banking and wealth management also put in a good performance with income up 7%, but the core UK retail business saw income slip 4% to £1.89 billion as mortgage margins came under pressure and deposit costs rose while the corporate business saw a 6% reduction in income to £443 million on lower liquidity pool income.
A tight rein on costs meant operating expenses rose just 1% to £4 billion but that still leaves the bank with the highest cost-to-income ratio of the Big Four at 62%.
Credit impairment (bad loan) provisions were £400 million, in line with last year’s second quarter, leading to pre-tax profit of £1.94 billion which was fully 24% or £375 million ahead of consensus.
RAISED TARGET AND MORE BUYBACKS
Return on tangible equity – a ratio increasingly being referenced by the big banks in 2024 – was 9.9% but the bank lifted its guidance to above 10% for the full year rising to above 12% for 2026 which is comfortably ahead of consensus.
In line with expectations, the bank rolled out another £750 million share buyback as it targets £10 billion or more of shareholder distributions between now and 2026.
Barclays shares are up more than 50% year-to-date, second only to NatWest Group (NWG) and well ahead of the FTSE 100.
Gary Greenwood at Shore Capital estimates the stock trades on a multiple of just 0.7 times tangible net asset value against his price target of 0.9 times, implying 30% further upside to the 300p mark.
‘With consensus upgrades anticipated and a low rating, we expect the shares to continue their upward trajectory,’ asserts Greenwood.
LEARN MORE ABOUT BARCLAYS
