Barclays profit surges as equity traders cash in on volatility
Barclays profit surged ahead of expectations in the second quarter of the year as market turmoil fuelled a bumper performance in its equity trading division.
The FTSE 100 giant revealed it would launch a new £1bn share buyback after pre-tax profit jumped 17 per cent from the prior year to £6.1bn across the first half of the year. That was ahead of analyst forecasts of £5.9bn.
The British lender said income in the three months to the end of June reached £8.2bn, up £2.1bn from the same quarter last year.
Shares declined 4.8 per cent in early trading to 503.6p, but the stock has risen 5.1 per cent since the start of the year.
Investment bank boost
The bank’s investment bank arm took advantage of widespread market volatility in the second quarter caused by the conflict in Iran.
Income in the division rose 20 per cent, driven by the performance of its global banking division and investment banking fees. Total income from investment banking hit £3.95bn, ahead of the £3.65bn predicted by analysts.
Income in its equity trading division was up 45 per cent compared with the same period last year at £1.26bn. That performance trailed the performance of banks on Wall Street which were up an average 69 per cent in equities for the period, aided by the huge SpaceX initial public offering that helped fuel earnings in the US.
Chief executive, CS Venkatarishnan, known as Venkat, is pursuing a mission to revamp the lender’s investment banking division, pledging to slash its share of group risk-weighted assets.
Chris Beauchamp, chief market analyst at investing and trading platform IG, said: “With the share price sitting at post financial crisis highs there is little room for error for Barclays, but these results provide the reassurance that the group is well-placed for the rest of the year.
“A solid run for the investment banking division helps allay concerns around the size of the motor finance claims, and for now the bigger concern will be how the deeply uncertain outlook for the global economy will play out in the months to come.”
‘Watch this space’
Barclays’ private bank and wealth management arm (PBWM) also secured a five per cent increase in income to £713m, reflecting growth in client balances.
But the arm’s return on tangible equity fell to 26.1 per cent from 33.2 per cent the prior year.
Venkat said it wants the PBWM division to be “a bigger part of the bank” amid its efforts to shed its reliance on investment banking and plans to invest further into the arm.
“Watch this space,” he said.
Upgrading targets and Burnham bank tax
The bank announced a dividend of 5.9p per share, an increase from the prior year’s 3p per share.
The firm also upgraded its 2026 income target to roughly £31.5bn, reflecting its “robust growth” in its investment banking arm.
Group finance director Anna Cross also urged Burnham not to hike taxes on banks, as concerns that the government may slap the sector with a hefty bill grows.
Cross said: “UK banks already have the highest rate of tax globally.
“The track record that we and other banks have in terms of supporting UK growth…is really important for the health of the economy and we hope that will be considered.”
Venkat added that while the bank welcomes Burnham’s “commitment to growth”, it wishes to use its capital to “support investment and to support growth” rather than pay tax.