Barclays rebuffs activist pressure with buoyant results
Strong investment bank performance boosts earnings
Barclays has fired back against activist investor Edward Bramson with a strong quarterly performance in its investment bank, which helped the UK group to report an almost trebling of pre-tax profits in the period.
Boosted by stronger equity trading activity in the three months to June, Barclays international unit reported slight year-on-year rises in pre-tax profits and in revenues that strengthens its case for investing in the contested investment bank rather than pulling back.
The investment banking unit’s solid performance, which mirrors strong trading results from US rivals, contributed to an overall 10 per cent rise in revenues at Barclays. Revenues inched up at its UK unit, but this made a healthy pre-tax profit compared with a loss last year.
Operating costs across the group were down 2.6 per cent, while lower litigation and conduct charges helped the bank to make a net profit of £1.2bn - more than a third above consensus analysts’ expectations and compared to a loss of £1.4bn in the same period of last year.
The bank proposed an interim dividend of 2.5p and said it was on track more than double the annual pay-out to 6.5p this year. The bank had a return on tangible equity of 11.8 per cent and said it was on track to hit its target of above 9 per cent next year.
Jes Staley, chief executive, said: “The second quarter …underlines the growing pace of delivery at Barclays. This is a business which is performing well, having addressed the challenges of the last decade.”
The better-than-expected results may relieve some of the pressure on Barclays from Mr Bramson’s activist investment fund Sherborne, which recently became one of its biggest shareholders by acquiring a 5.4 per cent interest in the bank.
Mr Bramson is yet to publicly show his hand but one person who knows him well said he was likely to call for Barclays to return to shareholders much of the £23bn of capital tied up in its corporate and investment banking division by shrinking the unit.
But Barclays said its closely watched fixed income trading unit decreased revenues by 2 per cent in the quarter while its equity trading revenues were up 32 per cent.
Since he took over as Barclays chief executive in December 2015, Jes Staley has sought to clear up the non-core assets that were clogging up its balance sheet and the litigation risks that represented a barrier to rebuilding its dividend.
Barclays recently completed its multiyear restructuring and sold off most of its African operation to address longstanding concerns about its capital levels.