Shares in the British banking institution Barclays took a dip in early trading on Thursday. This happened despite the bank’s annual pre-tax profits surpassing expectations. The reason for the drop was that the market was unimpressed by the bank’s future projections.
Barclays reported a 24% increase in pre-tax profit in 2024, reaching £8.108 billion, just marginally above the predicted £8.081 billion, as per LSEG data. Shareholders also saw a 24% rise in net profit, totaling £5.316 billion in 2024. However, this fell below analysts’ expectations of £5.449 billion. Fourth-quarter attributable profit was recorded at £965 million, which was also less than the estimated £994 million.
In terms of total income, the bank saw an increase to £6.96 billion in the final quarter of 2024, contrasted with £5.6 billion in the same period of 2023. The main Barclays investment and retail units recorded 28% and 46% yearly rises respectively, totaling £2.61 billion and £2.62 billion.
The bank’s return on tangible equity, a profitability indicator, averaged at 10.5% in 2024, a significant increase from 9% the previous year. Barclays has targeted a further increase to around 11% in 2025 and over 12% in 2026.
Barclays is also aiming for a net interest income (NII) of £7.4 billion across its retail unit in 2022, which aligns with projections made by Citi analysts. NII is a critical measure of profitability, highlighting the income a bank generates from loans after accounting for the interest paid on deposits.
Despite the solid performance, analysts suggest that the results are not particularly exciting, given the bank’s strong performance over the past year. The outlook provided by the bank was also deemed disappointing, particularly as there was no change to the FY26 targets.
As part of a strategic overhaul, Barclays has been working to reduce costs by £2 billion by 2026, boost shareholder returns, and stabilize financial returns. This has resulted in a sharper focus on profitable consumer and lending operations and the integration of British grocer Tesco’s retail banking business.
The bank could also stand to gain from HSBC’s decision to exit its M&A and equity capital markets businesses in Europe, the U.K., and the U.S. This move is part of a larger restructuring of HSBC’s investment banking operations.
Barclays has also recovered from a significant three-day tech outage that disrupted transactions recently. The bank now faces challenges such as the sluggish U.K. economy, a reduction in IPO activity, and the Bank of England’s recent rate cut.
Barclays saw its share price fall by 5.51% by noon London time.
