The performance of the Barclays share price has been underwhelming this year, as concerns over low interest rates, disruptions to trade, and limited market volatility have weighed on the entire sector.
Sector-wide concerns have hindered Barclays share price
After a difficult Q1, when profits came in below the level a year before, Q2 appears to have been a much better quarter for Barclays.
This would appear to be a welcome boost for CEO Jes Staley, whose strategy for turning the bank around has come under fire from activist shareholder Edward Bramson of Sherborne Capital, who earlier this year failed with an attempt to gain a seat on the board and who wants management to divest the underperforming investment bank.
Profits after tax for the half year came in at just over £2.47bn, over double from the same period a year ago. The direction of travel for net operating income was disappointing, coming in at £9.8bn, down from £10.3bn, however this has been a familiar theme for a lot of banks in this reporting season. The Barclays share price has not been the only one to underwhelm investors so far this year.
Investment bank and equities perform for Barclays
As far as the investment bank is concerned Q2 was a much better quarter as FICC income rose to £920m, the best quarter in quite some time, pushing revenues up to over £1.8bn for the half year. Equities also did quite well, turning over £517m, the best quarter since Q2 last year, and helping push profits here up close to £1.2bn for H1.
The retail bank had a more mixed first half, and unlike Lloyds yesterday its PPI provision was more modest at £360m, though management did warn that these could still rise. Personal banking decreased 4% to £1.9bn, however business banking improved 7% to £651m.
An increase of £1.8bn in mortgage lending helped improve the loans and advance numbers to £189.1bn, however its net interest margin declined modestly to 3.91%.
The focus on costs appears to be paying dividends, with management stating that they expect full-year costs to come in below £13.6bn, down from a previous estimate of £13.6-13.9bn.
Barclays broadly meets expectations this quarter
At the end of Q1 there were a number of questions about how Jes Staley’s plan for the bank was playing out. After a better performance in Q2 these voices may start to get a little bit quieter, with the bank broadly meeting expectations in this quarter. Investors will be hoping this has a postitive effect on the Barclays share price.
The bank did add a number of caveats with respect to its guidance, particularly around Brexit, trade and the problems in the euro area, which it said could materially affect its outlook.
The bank announced an interim dividend of 3p a share.
Disclaimer: CMC Markets is an order execution-only service. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.