- Second-quarter’s £2.5 billion pre-tax profit higher than expected
- Bank launches second £1 billion share buyback of the year
- No change to profit guidance from management but shares hit highest mark since 2008 all the same
- Shares still the cheapest among the big five FTSE 100 banks on an asset value basis
“It has taken an awfully long time for shareholders to forgive and forget but Barclays is finally earning and paying its way back into investors’ affections, as its share price hits its highest mark since 2008 after a strong set of second-quarter profits,” says AJ Bell investment director Russ Mould.
“The April-to-June period was the fourth best quarter for Barclays this decade, as the loan book grew, net interest margins held firm and litigation costs and loan losses remained subdued, with the result that the bank sanctioned both a new £1 billion share buyback and an increased dividend.
Source: LSEG Refinitiv data
“Quite why bankers continue to press for an easing of regulation and an end to the ringfencing of retail deposits is a mystery, as their profits continue to boom and shareholders seem happy, too, judging by how the banks’ valuations keep rising. Easier regulation may provide the opportunity to generate higher returns, but potentially only by taking more risk. However, investors seem happy with banks as rather dull utilities, which churn out consistent profits and generous cash payouts, rather than the sort of freewheeling lenders and speculators that eventually got themselves, and the global economy, into trouble as a result between 2007-09.
Source: Company accounts, Marketscreener, consensus analysts’ forecasts, LSEG Refinitiv data
“Perhaps boring really is best. Even though Barclays’ shares are at seventeen-year highs, they are still the most lowly-rated, or cheapest, relative to the bank’s net asset value (NAV), or book value, within the big five FTSE 100 banks. The other four – HSBC, Lloyds, NatWest and Standard Chartered – all trade at a premium to NAV, whereas Barclays trades at a modest discount. This may be due to the lingering perception that Barclays’ investment bank adds to the risk profile of the overall business, thanks to the danger that a bull market could easily give way to a bear market, should something unexpectedly go wrong.
“For the moment, though, shareholders continue to bask in the banks’ lavish cash returns, in the form of dividends and share buybacks. Between them, the big five are expected to return 11% of their stock market valuations via these mechanisms in 2025 alone.
Source: Company accounts, Marketscreener, consensus analysts’ forecasts, LSEG Refinitiv data
“Analysts believe that aggregate profits across the quintet will drop slightly in 2025, thanks mainly to HSBC and its exposure to both China, where the economy continues to wrestle with a real estate bust, excess debt and Trump’s tariffs. The effect of the dollar’s weakness against sterling cannot be underestimated either, as this impacts the profits made by HSBC and Standard Chartered, at least when they are translated back into pounds. Analysts do expect a further advance to a new, all-time high in 2026, as pre-tax profit across the five lenders reached £54.6 billion, more than 50% above the pre-financial crisis peak of £35.8 billion.
Source: Company accounts, Marketscreener, analysts' consensus forecasts for Barclays, HSBC, Lloyds, NatWest and Standard Chartered
“Such bumper profits are funding those cash returns to shareholders, forecast to exceed £30 billion this year, the second-highest figure on record.
Source: Company accounts, Marketscreener, analysts' consensus forecasts for Barclays, HSBC, Lloyds, NatWest and Standard Chartered
“Barclays’ second-quarter results gave no hint that this bonanza is about to end any time soon, despite niggling worries over the state of the UK economy, worries that could be fuelled by Paragon Banking’s lowered guidance for mortgage lending on Tuesday.
Source: Company accounts
“The loan book grew nicely for the third quarter in a row.
Source: Company accounts
“The net interest margin on that loan book remained stable, at least in the UK, and as a result net interest income exceeded £3.5 billion for the second quarter in a row.
Source: Company accounts. *Barclays UK
“Strong control of costs kept the cost-to-income ratio below 60% for the second quarter in a row, at 59%, some four percentage points below the equivalent period a year ago. Just as helpfully, Barclays kept its nose clean and litigation and conduct costs below £100 million in the quarter yet again and there was no sign of deterioration in the loan book, where a loan impairment ratio of 0.44% equated to a bad loan charge of just £469 million, a figure that is far from out of the ordinary and one that does not smack of any economic downturn.”
Source: Company accounts
