27th Apr 2023 14:35
(Alliance News) - Barclays PLC was London's best blue-chip performer on Thursday afternoon, bucking a banking sector sell-off across the Atlantic, as it said all three of its businesses performed well in the first quarter of 2023, with what it described as high-quality income growth and double-digit returns.
Shares in Barclays were up 4.7% at 161.14 pence on Thursday afternoon in London. Over the past 12 months, the stock is up 14%.
In contrast, First Republic Bank slid a further 30% in New York on Wednesday, after halving the day before, as regulators, big banks and potential bidders for its assets all held back from stepping in to help the embattled San Francisco-based regional lender, following the collapse of local peer Silicon Valley Bank.
"American officials are still scratching their heads as to what they should, or can, do about First Republic Bank, as its customers flee and share price collapses, but investors in Barclays have no such grounds for concern after its first-quarter results," said Russ Mould, investment director at AJ Bell.
Barclays reported pretax profit of GBP2.60 billion, up 16% from GBP2.23 billion a year prior. Total income amounted to GBP7.24 billion, up 11% from GBP6.50 billion.
Barclays UK income increased 19% due to net interest income growth from "higher rates and continued structural hedge income momentum", the bank said. This delivered a net interest margin of 3.18%, up from 2.62% the year prior.
AJ Bell's Mould said that Barclays was "doing what a bank should do" by benefiting from a higher interest rate environment: "boosting its net interest margin by increasing the amount it charges on loans by more than the amount it pays out on deposits."
Barclays' return on tangible equity was 15.0%, compared with 11.5% in the same quarter a year prior. Its CET1 ratio was 13.6% at the end of March, down from 13.9% at the end of December.
Chief Executive CS Venkatakrishnan said: "All three businesses have performed well with high quality income growth and double-digit returns. The momentum across the group allows us to maintain a robust capital position, deliver attractive returns to shareholders, and support our customers and clients through an uncertain economic environment."
Richard Hunter, head of markets at interactive investor, said there could be "little cause for complaint" on the numbers which have grown and beaten expectations "virtually across the board".
"The strength of these numbers and an unchanged outlook from the group will give some comfort to embattled investors, with the market consensus of the shares as a buy likely to remain intact," Hunter suggested.
Shore Capital said on Thursday Barclays remains the "most undervalued of the large UK banks" and rated the bank's shares a 'buy'.
Looking ahead, the bank said it remains on track to deliver its 2023 targets, with all its performance metrics in line with or ahead of guidance at the first quarter.
Matt Brizman, equity analyst at Hargreaves Lansdown, noted that it was still "early doors" for the major UK banks reporting cycle, but added that signs "look promising" hat issues over the pond aren't leaking into the wider ecosystem.
"Barclays is one of the world's largest global investment banks - a fact sometimes overlooked. Investment banking fees continue to come under pressure as activity in the market remains subdued given the uncertainty. Still, that very same volatility boosts other areas like fixed income and currency trading. Putting last years governance issues to one side, the valuation doesn't look overly demanding at current levels, and the 6.1% forward dividend yield, with the prospect of buybacks on top, looks attractive," he said.
By Heather Rydings, Alliance News senior economics reporter
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