25th Apr 2024 13:38
(Alliance News) - Shares in Barclays rose as the City gave the thumbs up to a better-than-expected first quarter outcome although the bank's US business disappointed some.
Barclays PLC reported a fall in first quarter profits as a weak investment banking performance hindered performance.
In the first three months of 2024, pretax profit fell to GBP2.28 billion from GBP2.60 billion a year prior, Barclays said. However, this beat the market consensus by around 4%.
Shares in Barclays rose 6.0% to 202.60 pence each in London on Thursday. The wider FTSE 100 rose 0.6%.
Barclays said total income fell to GBP6.95 billion in the first quarter, from GBP7.24 billion a year earlier. Net interest income fell 4% to GBP3.07 billion from GBP3.05 billion.
The net interest margin declined to 3.09% from 3.18%, while the return on average tangible shareholders' equity declined to 12.3% from 15.0%.
Barclays Investment Banking income fell 7% to GBP3.33 billion from GBP3.57 billion. Within Global Markets, a strong performance in Equities was more than offset by fixed income.
Barclays UK income decreased 7% to GBP1.83 billion from GBP1.96 billion as higher structural hedge income was more than offset by adverse dynamics in deposits and mortgages, in addition to the transfer of Wealth Management & Investments to Barclays Private Bank and Wealth Management.
Barclays said total operating costs fell 3% to GBP4.00 billion from GBP4.11 billion. Including a UK regulatory levy and litigation expenses, total operating expenses rose 2% to GBP4.18 billion from GBP4.11 billion.
Barclays said its cost to income ratio was 60% with a target of around 63% in 2024 unchanged.
Barclays said total deposits increased by GBP13.5 billion to GBP552.3 billion compared to GBP538.8 billion at the end of 2023.
Credit impairment charges were flat at GBP0.5 billion.
The common equity tier 1 ratio fell to 13.5% from 13.8%, in the middle of the target range of 13% to 14%.
Richard Hunter, head of markets at interactive investor, felt the results showed "stable rather than dynamic" growth over the quarter, beating expectations on most measures but with some "question marks" over its US operations.
Overall income was marginally ahead of the estimated GBP6.9 billion, with pretax profit also ahead of expectations of GBP2.2 billion.
He noted revenue was impacted by any number of factors, including mortgage margin pressure and adverse deposit dynamics at Barclays UK, lower inflation-linked income and a mixed performance from its investment bank.
Indeed, the performance of Barclays Investment Bank could lead to some investor disappointment, he suggested.
"Recent strong numbers from the likes of Goldman Sachs and Morgan Stanley in the US were expected to read across to Barclays, whereas the unit reported an income decline of 7%," he pointed out.
Fee and trading income for equities and debt were positive, but more than offset by weakness in fixed income and lower advisory fees, he noted.
"This is significant to the group’s overall performance, since the investment bank accounts for around half of total group revenue."
Matt Britzman, equity analyst, Hargreaves Lansdown said cost controls look to be making a difference for Barclays.
"First-quarter trading was better than expected, but the weaker net interest income guidance for 2024 will be a little disappointing," he added.
"Looking below the hood on defaults, Barclays has a big stake in both the UK and US card market which adds another angle."
He pointed out that across the pond, default levels surprised on the upside and are higher than back in the UK, with US consumers clearly feeling the pinch a tad more.
This was one area that disappointed, but Barclays remains confident in its reserve levels and expects things to improve as the year progresses, he added.
"There's a new strategy at play and plenty to like about the globetrotting operations. But markets are unlikely to fully reward the stock until it demonstrates sustained progress, especially in areas like investment banking where the US peer group is so strong," Britzman suggested.
By Jeremy Cutler, Alliance News reporter
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