Barclays shares jump as income and profits beat expectations

Barclays Q1 update is another steady-as-you-go report from a UK bank. With clouds forming over banks’ net interest margins and questions remaining about the global economy, Barclays investors will be pleased to see that the bank performed marginally better than expected in the first quarter.

Total income was £7bn, a smidge higher than the £6.9bn expected, leading to profits of £2.3bn, again better than expected.

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Barclays shares were over 3% higher in early trade on Thursday as investors reacted to an update that gave them nothing to be overly concerned about pricing fuel to the bank’s rally that started in October 2023.

Barclays shares are up over 50% from their lows, making it one of the better-performing banks in terms of share price. 

Compared to Lloyds, which reported yesterday, Barclays is a much more international bank with a better-diversified business model. For example, Barclays has a substantial investment operation.

In the UK, Barclays’s net interest margin, at 3.09%, was much better than that reported by Lloyds yesterday, which will encourage investors. However guidance for the year ahead is less appealing and the risks of lower interest rates to Barclays profits are notable.

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“Credit where it’s due, 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,” said Matt Britzman, equity analyst, Hargreaves Lansdown.

“In its UK arm, results were very similar to what markets heard from Lloyds yesterday. Structural hedge income is booming as lower-yield instruments are being reinvested at higher rates. That’s helping to offset ongoing weakness from depositors in search of better rates and a mortgage market that’s not as profitable as a few years ago. Both those headwinds are expected to ease throughout the year, and with loan default levels actually ticking down at the group level, there’s enough here to whet investors’ appetites.

“Looking below the hood on defaults, Barclays has a big stake in both the UK and US card market which adds another angle. Over 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.”

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