Barclays shares slump on revenue miss, reduced guidance

By Steve Goldstein

Continuing what's been a difficult week for U.K.-headquartered banks, Barclays shares fell as much as 7% on Thursday as the bank reported revenue below expectations and reduced its margin guidance.

Barclays (BARC.LN) reported a 31% rise in pretax profit of GBP1.96 billion, which topped the GBP1.91 billion consensus estimate after taking fewer impairments than analysts estimated.

Income, however, fell 6% to GBP6.29 billion, below the GBP6.53 billion consensus.

Analysts also highlighted new guidance that U.K. net interest margin for the year will be below 3.2% -- currently estimated to be 3.15%, which the bank attributed to factors including customers holding lower deposit balances and changes in deposit pricing. Customers appear to be using excess deposits to pay down mortgages ahead of their re-fixings, as mortgage rates in the U.K. have surged.

Barclays made clear that it still wants a big presence in corporate and investment banking, which represents 60% of its risk-weighted assets.

"I think I have been pretty clear that when we look strategically at the investment bank, it's been a great success," said CEO C.S. Venkatakrishnan, according to a transcript of the analyst call by S&P Global Market Intelligence. "I also recognized that at approximately 60% to 70% of the bank, it is much more important now to grow the bank that's outside of the investment bank -- and to get a better balance overall."

Within corporate and investment banking, he indicated that Barclays wanted to invest in less-capital intensive areas.

Citigroup analyst Andrew Coombs says the revenue volatility of the fixed income, currency and commodities division and equities division is more than any of its peers in the U.S. or Europe. "While Barclays has made market share gains, notably in FICC, it is hard to reward this when the quarterly volatility is so high, meaning the market puts a lower multiple on these revenue streams," he said.

NatWest shares have slumped 7% over the last five days as its CEO resigned, while Lloyds stock has weakened by 3% as its pretax profit missed analyst estimates.

-Steve Goldstein

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07-27-23 0903ET

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