Barclays (BARC.L) reported lower earnings for the start of the year as mortgage loans and deposits declined and investment banking underperformed.
Profit after tax fell to £1.6 billion in the first three months of 2024, compared with £1.8 billion in the same period last year, Barclays said in an earnings release.
Pre-tax profit fell 12% to £2.28bn in the first three months of the year, down from £2.6bn a year earlier. Despite the decline, the result is still slightly better than the company’s own consensus forecast of £2.195bn.
Group profit fell 4% to £7 billion, while the net interest margin – the difference between the bank’s fees on loans and savings – fell to 3.09% from 3.18%.
At the same time, the net interest margin (NIM) (excluding investment bank and headquarters) fell to 4.12% in the first quarter from 4.16% in the same period last year.
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Barclays said business in the UK was impacted by “subdued mortgage lending as a result of lower market demand”, while customer deposits fell due to increasing competition for savings accounts in the UK.
Customer deposits fell two percent due to lower account balances, which the bank said reflects broader consumer trends.
Barclays’ investment bank stuttered in the first quarter, failing to match the performance of its Wall Street rival, with fixed-income trading revenue falling 21 percent.
Barclays is seeking to restore its credibility with investors after years of share price underperformance, clashes with activists over the role of its investment bank and a change in management.
CEO CS Venkatakrishnan said: “We are focused on the disciplined execution of the plan we outlined in our investor update on 20 February. We have now announced the sale of our successful Italian mortgage book and are investing in our higher-yielding UK consumer businesses, including through the expected completion of the acquisition of Tesco Bank in the fourth quarter of 2024.
“We continue to exercise cost discipline and remain well capitalized with a common equity tier 1 (CET1) ratio of 13.5% at the end of the quarter.”
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Venkatakrishnan has presented a three-year plan to boost the share price. As part of a restructuring, the company wants to achieve savings of around one billion pounds this year by improving the bank’s efficiency. A total of around two billion pounds in savings is targeted by 2026.
Will Howlett, financial analyst at Quilter Cheviot, said: “After a solid start to the year, Barclays is ready to reshape its valuation strategy and deliver on its promises to shareholders.”
The bank reiterated its commitment to return £10 billion to shareholders in dividends and share buybacks between 2024 and 2026.
Richard Hunter, head of markets at Interactive Investor, noted: “Shares are up 24% over the past year, compared with a 1.9% gain for the broader FTSE100, including a strong 42% rally over the past six months. The initial share price reaction to the numbers was also positive, and with Barclays being a group with deep pockets and a diversified business model, the longer-term prospects remain attractive for investors.
“Therefore, it is highly likely that the market consensus on the stock will remain as a buy.”
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