Barclays gets boost from dealmaking in second quarter

Bloomberg

Barclays Plc’s investment bankers brought in a record haul as the booming deals market extended through the second quarter, offsetting more muted results in trading and helping the group to deliver improved profit and fresh shareholder payouts.
Income from capital markets and merger advisory at the London-based lender rose by almost a fifth to 873 million pounds ($1.2 billion), outperforming the average on Wall Street. This is the highest since Jes Staley took over as chief executive officer in late 2015, strengthening his hand as he tilts the group toward investment banking.
With the economic outlook improving, Barclays said it planned to buy back more shares this year worth as much as 500 million pounds. It also announced a 2 pence per share half-year dividend and said that is expected to represent, under normal circumstances, around one-third of total dividends for the year. The announcement comes weeks after the Bank of England lifted restrictions on payments that were imposed early in the Covid-19 pandemic.
Barclays’ domestic retail bank benefited from the economic rebound as Covid-19 restrictions are lifted. The bank released a net 797 million pounds from last year’s provisions for loans that could turn sour during the pandemic, joining UK peers in unwinding several billions of pounds they booked in the initial stages of the outbreak.
“Credit conditions remain pretty benign; we are not really seeing a pickup in delinquencies or any stress in the environment yet,” Tushar Morzaria, finance director, said in a phone interview. “Our expectation is that we should see a pickup in default, but if we don’t, then there could be further release far more soon.”
Overall, Barclays’ results in the second quarter were ahead of forecasts. Shares in the bank rose more than 4% in London trading. “A solid and reassuring set of numbers,” analysts at Citigroup said in a note to clients.
Revenues from trading, though, plunged as the rally in fixed-income markets that drove record profit a year ago petered out — a trend that caught out many US rivals but largely spared Deutsche Bank AG, which also announced earnings. One of Staley’s key targets, return on tangible equity, soared in the quarter and Barclays said this measure was likely to be above its 10% target during this year, after falling short during the pandemic.
Barclays also announced a 321 million-pound charge as it cuts back on real estate. The lender said in June it was giving up its second office in London’s Canary Wharf financial district, moving traders and bankers into its main headquarters nearby. Morzaria said the bank was still reviewing its branch footprint and is working on moving some staff out of its central offices.