In the days leading up to Barclays Q1 numbers back in April, the Barclays share price hit its highest levels since December 2019, on optimism that the market volatility and rising yields seen in Q1 would deliver healthy revenues and profits across the board.
Since then, we’ve seen the Barclays share price slip back from those peaks, after the bank failed to release any loan loss reserves, and FICC trading revenue came up short.
While this may have been down to an abundance of caution more than anything else, it was still a disappointing outcome, with the 200-day MA currently acting as support for the price action this month.
With US banks releasing loan loss reserves set aside due to the pandemic to boost profitability, there was an expectation that UK banks would so the same as the economic picture started to brighten.
The Q1 numbers were still OK, despite a 6% fall in total income to £5.9bn from the same quarter last year, while lower impairment provisions meant that net operating income saw a 40% increase to £5.8bn, boosting attributable profits to £1.7bn.
One thing the Q1 numbers did prove was that CEO Jes Staley was probably correct in pushing back on activist shareholder Ed Bramson to force the slimming down of the investment bank, and despite the miss on fixed income, the equities business saw a big beat, and banking fees also came in better than expected.
Q2 numbers boost Barclays share price
Today’s Q2 numbers have played out in a similar fashion, with FICC trading revenue falling 39% to £895m, while equities trading saw a rise of 15% to £777m. While this is disappointing, it wasn’t unexpected and unlike last quarter, we have seen the bank release some reserves as it added back £742m from its provisions last year.
Overall, at Barclays investment banking division, pre-tax profit rose to £1.58bn, well above estimates of just over a £1bn, which was primarily driven by a 19% increase in banking fees from M&A.
Profit before tax beats forecasts
The stong performance from the investment banking division helped boost profits before tax to just under £5bn in the first half of the year, well above forecasts, with the bank saying it would pay a dividend of 2p a share, as well as buying back £500m of its own shares. The result of the positive results was evident in the movements of the Barclays share price this morning.
For the UK business, there was a modest rise in total customer deposits over the first half, however we also saw loans increase by just over £5bn. Credit card lending saw a decline from the end of last year, which suggests that UK consumers are leaning towards paying down higher interest paying debts.
If we look at the numbers on a quarterly basis there is some sign of an improvement in loan demand in Q2, however business lending remained static between Q1 and Q2.
All in all, these look like a decent set of numbers, with the investment bank doing most of the heavy lifting, while on the domestic front, UK businesses and consumers come across as somewhat cautious in their spending patterns.
The Barclays share price has reacted favourably to this morning's results, showing a 4% lift, which should put a smile on shareholders' faces.
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