Barclays (BARC.L) has surprised the market with the announcement of a share buyback program and an upgraded profitability target for the year. This positive outlook is underpinned by confidence in the bank’s income generation and cost-cutting initiatives, which appear to outweigh challenges in its investment banking division and fresh provisions for potential losses. Barclays is a British universal bank, providing a range of financial services including retail banking, corporate and investment banking, and wealth management. The company operates in over 40 countries and employs approximately 83,500 people.
The bank has allocated an additional 235 million pounds to address a motor finance mis-selling scandal and absorbed a 110 million pound charge related to the collapse of U.S. firm Tricolor. Despite these setbacks, shares in Barclays surged 4% in early Wednesday trading, driven by investor enthusiasm for the 500 million pound buyback. Barclays intends to announce buybacks on a quarterly basis moving forward and now aims for a return on equity above 11% this year, revising initial expectations due to stronger-than-anticipated income and expedited cost savings.
While the investment bank saw an 8% year-on-year increase in income, bolstered by a 15% rise in its global markets business, fees from deals declined by 2%. This contrasts with the performance of Wall Street rivals, who reported double-digit gains amid renewed corporate confidence. CEO C.S. Venkatakrishnan explained that this underperformance was not due to insufficient investment in the unit, but rather the bank’s absence from a few major deals that dominated the quarter.
Despite concerns about weakening lending standards, particularly in the private credit market, Barclays maintains that its exposure is manageable. The bank reported that private credit constitutes 20 billion pounds, or 6%, of its total loan portfolio, with 70% of this exposure located in the United States. Barclays also stated it had no exposure to First Brands, an auto parts maker that filed for bankruptcy.
