Barclays announces £750 million share buyback amid earnings upgrade

Barclays (BARC.L) announced a new 750 million pound ($957 million)share buyback and upgraded its longer term earnings guidance on Thursday, driven in part by an upswing in trading income that offset a 9 per cent profit fall over the first half of 2024.

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

In keeping with a sector-wide trend also seen at HSBC (HSBA.L) and Standard Chartered (STAN.L), Barclays also said it planned to return at least 10 billion pounds of capital to shareholders between 2024 and 2026 through dividends and share buybacks.

Barclays shares opened higher on Thursday but were trading 1.5 per cent lower at 0912 GMT, amid a broader stock market sell-off.

Its share price has still surged more than 50 per cent so far this year, after CEO C.S. 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 per cent rise in income over the second quarter, driven by the equities business, helped Barclays echo the bumper returns from trading reported last month by Wall Street rivals.

Barclays said second-quarter equities income rose 24 per cent, beating the 18 per cent increase at Morgan Stanley (MS.N), the 7 per cent gain seen at Goldman Sachs (GS.N) and JPMorgan’s (JPM.N) 21 per cent 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.

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 fixed income, currencies and commodities (FICC) revenues fell 3 per cent, while investment banking income from deals rose 44 per cent.

DOMESTIC DIFFICULTIES

Later on Thursday, the Bank of England is broadly expected to announce a 0.25 per cent base rate cut, a move that many cash-strapped homeowners and borrowers hope will lower their debt costs but could also dent interest income for banks.

Most banks have planned ahead to mitigate the impact 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 11 billion pounds over the year, from 10.7 billion.

But returns remain under scrutiny.

The return on tangible equity (ROTE) at the bank’s UK corporate bank tumbled to 16.6 per cent compared with 27.3 per cent a year ago. The unit’s pretax profit sank 36 per cent and expenses jumped 15 per cent compared with the first half of 2023.

Barclays also reported revenues fell 4 per cent 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,” said Richard Hunter, Head of Markets at interactive investor.

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

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

($1 = 0.7836 pounds)