Barclays Shares Drop Over 4% as UK Lender Signals Ends of Rates Boom

Bloomberg2023-07-27

Barclays Plc shares fell after the lender cut its guidance for net interest margin at its retail bank, signalling the boost from rising interest rates is coming to an end.While the UK business ...

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She said there’s “not a huge amount of growth in the market but it is extremely active” as borrowers hunt for the cheapest deals possible. Shares in the lender were down 4% in premarket trading even as Barclays said it would buy back a further £750 million ($973 million) of stock. The disappointing quarter adds pressure on Chief Executive Officer C.S. Venkatakrishnan’s work to improve the bank’s lagging share price. Benefits from rates are peaking while the investment bank, which consumes the most capital, posted lower-than expected results.Trading revenue fell 41% on a year ago to £1.75 billion. Revenue from the bank’s flagship fixed-income trading division fell 22% to £1.2 billion while equities trading revenue fell 60% to £563 million. This includes the impact of a securities error a year ago.Still, the group’s second-quarter attributable profit rose 24% to £1.33 billion, beating estimates of £1.28 billion by six analysts compiled by Bloomberg. Analysts at Citigroup said they expected Barclays missing revenue expectations and the lowering of its margin guidance in the UK “to be met with disappointment today.” As lenders earn more on money they hold with the central bank after 13 interest rate rises to tackle inflation, they have come under increasing pressure from politicians and regulators to pass more of this windfall to their customers. Lenders are also coming under scrutiny over “debanking” customers, after NatWest Group Plc dropped Brexit campaigner Nigel Farage. Venkatakrishnan said the bank supported government work to reform the rules on banking access. “We feel really really strongly that people should not be excluded on the basis of personal or political beliefs,” he told reporters. What Bloomberg Intelligence Says:Barclays’ top-line estimates are likely to decline following the lender’s surprise full-year 2023 net interest margin guidance cut to 3.15%, compared with more than 3.2% previously and consensus at 3.23%, on changing customer behavior, and a 22% dip in FICC revenue in the corporate bank. The cut and FICC decline more than offset modest beats on expenses (2%) and cost of risk in 2Q, and take the shine off a new £750 million share buyback.— Philip Richards, BI banking analystBarclays’ Margin Cut to 3.15%, Revenue Miss Bode Poorly: ReactThe latest share buyback is larger than analysts were expecting and follows on from a £500 million program that concluded in April. The company’s leadership had signaled moves to buy back its depressed stock earlier this year. Barclays recently hired consulting firm Boston Consulting Group to look at ways to improve its share price performance and has also started the sale of its German consumer finance business, which could pave the way for further disposals. Barclays is the third major European investment bank posting results after Deutsche Bank AG posted a smaller-than-feared decline in trading gains on Wednesday and BNP Paribas SA flagged in debt trading earlier Thursday. Wall Street banks have already reported an aggregate 13% drop in fixed income revenue from a year earlier as the volatility stirred by last year’s invasion of Ukraine trailed off. The bank’s revenue from advising on corporate deals and capital issuance also plunged 15%, in line with the broader market. Barclays has recently announced a flurry of senior banker hires after an exodus of managing directors in the US and parts of Europe. Other highlights from Barclays’s earnings in the quarter include:CET1 ratio of 13.8%First half dividend of 2.7 pence per shareReiterated earlier target of return on tangible equity of more than 10% in 2023","kind":"highlight","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":1,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2354591266"}