27th Jul 2023 14:30
(Alliance News) - Investors seemed slightly unhappy with Barclays PLC's results on Thursday, despite the bank proposing a larger than expected share buyback of GBP750 million.
Analysts, however, noted that income came in below expectations.
"Barclays' results are far from a mess, but it doesn't take much to disappoint the market and its latest results have certainly hit the nerve as far as investors are concerned," said AJ Bell investment director Russ Mould.
Shares were down 3.6% at 158.18 pence on Thursday afternoon in London.
The London-based consumer, business and investment bank said basic earnings per share increased 34% in the six months ended June 30 to 19.9p from 14.8p.
Barclays declared a 2.70p per share dividend for the half-year, up 20% from 2.25p in first half of 2022. It also plans to launch a share buyback of up to GBP750 million.
Back in February, Barclays had announced a share buyback of up to GBP500 million in February, which brought total share buybacks related to 2022 to GBP1.0 billion.
AJ Bell investment director Russ Mould noted that Barclays share buyback is much bigger than forecasts of GBP575 million, whilst interactive investor's Richard Hunter described it as "a bullish surprise."
Barclays reported a 13.2% return on tangible equity, up from 10.4% in the first half of 2022.
Total income increased 2.4% to GBP13.52 billion from 13.20 billion, which was slightly shy of expectations, while operating expenses were reduced by 12% to GBP8.06 billion from GBP9.13 billion.
Pretax profit increased 22% during the recent half year to GBP4.56 billion, which was slightly ahead of consensus, from GBP3.73 billion a year before.
Hargreaves Lansdown's Matt Britzman said: "lower-than-expected impairment charges were the key here, which pushed profit before tax ahead of consensus despite a miss on the top line.
However, interactive investor's Richard Hunter said: "The benefits of Barclays' diverse business model continue to shine through, with a strong overall set of numbers offsetting any pockets of trading weakness."
AJ Bell's Mould, meanwhile, looked at more macroeconomic influences on Barclay's results. In particular, he noted the impacts of higher interest rates on banks.
"The idea that higher interest rates make life easy for banks is a misconception. Yes, there is an opportunity to earn more money from lending. However, higher rates can curb activity for consumers and businesses which means investors are increasingly looking at the levels of bad debts among banking customers and in the case of Barclays, whether corporate deals are less common as we move away from the era of cheap financing," AJ Bell's Mould explained.
Going forward, the bank is aiming for an RoTE of over 10%. It said it is "well positioned" to achieve this following the above half-year return and due to its diversified income streams, although its guidance "remains sensitive to product dynamics including the trajectory of deposit balances and further macroeconomic developments".
Barclays also said its capital distribution policy will include a "progressive" dividend, potentially supplemented with share buybacks.
ii's Hunter said that Barclays seems "mindful of a mixed macroeconomic environment" going ahead, by keeping its guidance unchanged.
He continued: "Overall, the numbers are solid if mildly uninspiring, with the market currently in the mindset of punishing any consensus misses."
By Sophie Rose, Alliance News reporter
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