Barclays shares surge as bank beats forecasts despite drop in profits

By Louis Goss

Barclays shares surged on Thursday after the British bank surpassed analysts' expectations, despite reporting a 13% drop in its first-quarter profits driven by a slump in fees and the impact of higher interest rates which have seen U.K. customers switch to more generous rivals.

The bank reported a 4% drop in its total income, to GBP6.95 billion ($8.69 billion), and a 13% drop in its attributable profit to GBP1.55 billion, but nonetheless outstripped forecasts from eight analysts that it would generate GBP6.89 billion in income and GBP1.46 billion in attributable profit.

Shares in Barclays (UK:BARC), listed on the London Stock Exchange, increased 5% on Thursday having increased 30% in the year-to-date as it has pursued far-reaching plans to boost its performance by cutting its annual costs by GBP2 billion through layoffs and office space reductions.

Analysts at Peel Hunt, led by Robert Sage, said Barclays' results represent a "solid start to the year with good progress being made towards unchanged financial targets," in what was expected to be a worse set of results as it pushes ahead with its turnaround strategy.

The London-headquartered bank saw income from its investment banking division, which accounts for almost half of all revenue, drop 7%, to GBP3.33 billion, in the first quarter, as a slowdown in dealmaking hit fee income from its advisory and deal making businesses.

Barclays, however, held its outlook for 2024 as lower income from its investment bank and UK corporate and retail banking divisions was partially offset by a 4% increase in income from its US consumer arm which was bolstered by its credit card business.

In the U.K., Barclays saw the value of deposits in its British retail division drop by GBP17 billion in the year ending in the first quarter of 2024, as customers switched over to rivals offering higher interest returns on deposits.

The value of Barclays' UK loans portfolio also fell by GBP7 billion as customers reduced levels of borrowing in the face of higher interest rates, which are currently at 5.25%.

Together, this led to a 7% drop in income from Barclays UK division, to GBP1.82 billion, even though the bank generated higher margins on the differences between the Bank of England's interest rates and those it offered to customers.

In its push to cut its cots by GBP1 billion in 2024 alone, the bank delivered just GBP200 million worth of savings in the first quarter, as analysts questioned whether the bank will be able to achieve its goals without more layoffs.

-Louis Goss

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04-25-24 0755ET

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