Despite delivering impressive first-half results, Barclays shares fell nearly 5% in London trading following the earnings announcement, as reported by Reuters. The market reaction suggests investors were disappointed by the results despite the bank's strong performance metrics, with analysts noting that equities performance undershot market expectations boosted by Wall Street rivals' bumper quarter. The share price decline occurred even as the bank exceeded analyst expectations across key financial metrics, highlighting the complex dynamics between investor expectations and actual performance delivery.
Barclays delivered impressive first-half results with profit before tax of £6.1 billion for the January-June period, surpassing analysts' consensus estimate of around £5.94 billion. According to Reuters, the 17% rise in first-half profit was driven by strong equities trading and investment banking activity, helping the British lender capitalize on buoyant global markets. The bank has also announced a £1 billion share buyback, exceeding market expectations of approximately £831 million, and dividends worth £800 million as it returns excess capital to shareholders. However, the bank's performance was tarnished by an additional £500 million in expected costs for the second half of the year, which included streamlining efforts.
Europe's major banks have joined the global stock trading party, with Barclays reporting 46% growth and UBS achieving 53% growth in equity trading revenue compared to last year's second quarter, as reported by Bloomberg. BNP Paribas showed a 47% rise last week, while Citigroup also reported similar growth as they all benefit from strong equity derivatives activity, increased prime brokerage lending, and a tilt toward Asia where tech-related stocks have attracted major global hedge funds. The key difference for US leaders was their already huge businesses lending to hedge funds and other leveraged traders, with Citigroup more than doubling its hedge fund lending to $450 billion between 2022 and 2025, targeting $700 billion soon. Barclays noted that 80% of its revenue growth in markets came from its top 100 global clients.
Barclays reported continued momentum in domestic lending with gross mortgage lending reaching a record £10 billion in the second quarter, up from £7.7 billion in the previous three months, as reported by Reuters. UK lending balances increased 5% year-on-year, supported by stronger business lending and mortgage demand. The bank's income rose 8% to £4.5 billion, with the growth underpinned by robust performance across core businesses despite some challenges. However, the stronger operating performance was partly offset by higher credit impairment charges of £1.4 billion, up from £1.1 billion a year earlier, which included a one-off £228 million provision linked to the collapse of property lender Market Financial Solutions.
Barclays has raised its full-year income guidance to £31.5 billion, up from its previous forecast of £31 billion, and said it remains on track to achieve its strategic performance targets for 2026. According to Reuters, the upbeat earnings, higher income outlook and larger-than-expected share buyback underscore the bank's confidence in sustaining momentum despite an uncertain macroeconomic environment. However, the bank has lowered its forecast for UK economic growth in 2026 to 0.4%, citing persistent geopolitical uncertainty, volatile US trade policy and a more inflationary environment. Chief executive C.S. Venkatakrishnan said discussions with Chancellor John Healey had reinforced the government's commitment to economic growth while maintaining fiscal discipline, adding that the bank continued to see robust demand from both households and businesses despite the softer macroeconomic outlook.
Jefferies analysts described the report as "a slightly messy set of numbers," with an investment bank income beat partly offset by small misses elsewhere, as reported by Investing.com. The analysts flagged that some additional costs will come through in the second half that may not be reflected in current estimates. However, they noted that distributions are well ahead of estimates and the group remains "committed" and "confident" in its 2028 targets, including a >14% ROTE. Morgan Stanley analysts expect a neutral share price reaction, with possible profit-taking, noting that the investment bank's strength is "largely understood." The bank's return on tangible equity (RoTE) came in at 14.8% for the first half, while the CET1 ratio stood at 14.3%, with the bank reiterating plans to return at least £10 billion of capital to shareholders between 2024 and 2026.
