Barclays profits hit by drop in dealmaking

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Barclays profit rose 24 per cent in the second quarter as its retail banking and corporate business continued to benefit from higher interest rates, offsetting another decline in trading and dealmaking revenue at its investment bank.

Net profit increased to £1.3bn from £1.1bn in the same period last year, beating analysts’ expectations of £1.2bn, the British bank said on Thursday. However, the year-on-year comparison was flattered by £1.3bn in litigation and conduct charges taken in 2022 versus only £33mn this year. When this impact was stripped out, profit fell 6 per cent.

Overall group revenue fell 6 per cent to £6.3bn, missing analysts’ estimates of £6.5bn. Barclays also took fewer provisions for bad loans than analysts had forecast.

Profit jumped 17 per cent at the UK retail lending unit, which it said reflected “tailwinds from higher rates”. On Wednesday, the Federal Reserve raised its benchmark interest rate to the highest level in 22 years, and in June, the Bank of England raised interest rates to 5 per cent after a 13th consecutive increase.

At the investment bank, income fell 22 per cent to £3.2bn in the quarter, with fixed-income and equity trading both reporting double-digit declines, matching trends seen on Wall Street. Advisory and capital markets fees fell 15 per cent to £472mn, which the lender blamed on “lower client activity”.

The bank also announced a share buyback of £750mn, an increase on the £500mn completed in the first half.

“We have positioned Barclays carefully for this mixed macroeconomic environment,” said chief executive CS Venkatakrishnan. “This means we are able to distribute increased capital returns to shareholders, while providing targeted support to our customers and clients. Looking forward we are very confident of meeting our targets for the full year.”

Citigroup analyst Andrew Coombs said lower impairment charges enabled profits to come in better than analysts’ expectations. “The revenue miss is across all divisions, with the UK net interest margin guidance for 2023 also lowered,” he said.

“We expect the revenue miss and lower NIM guidance to be met with disappointment today,” he added.

Barclays shares fell 5 per cent in early trading in London.