ii view: Barclays reports a resilient performance

Barclays digital engagement with UK customers is now an all-time high.

Half year results to 30 June 2019

• Total income down 1% to £10.79 billion
• Pre-tax profit up 82% to £3.02 billion
• Interim dividend up 20% to 3.0p per share

Chief Executive James E Staley said:

“This was another resilient quarter of performance. For the second quarter in succession Barclays generated an attributable profit of over £1 billion. Barclays UK continued to build its mortgage and deposit balances, with stable credit metrics. This has partially offset the reduction in net interest margin from increased levels of customer refinancing, and lower interest earnings from UK cards balances. Digital engagement with our UK customers is at an all-time high, with just under 8 million customers now digitally active on the Barclays App. Management focus on cost control remains a priority, and we expect to reduce expenses to below £13.6 billion for 2019.”

ii round-up:

Barclays (LSE:BARC) operates via two main divisions: Barclays U.K. and Barclays International. 

Barclays UK includes the personal banking, Barclaycard, and wealth, entrepreneur, and business banking. Barclays International includes the corporate and investment banking and consumer, cards, and payments segments in Europe and the US.

For a round-up of these half-year results, please click here.

ii view:

Like rivals, Barclays has looked to become a simpler more focused bank since the financial crisis. Unlike rivals, management has remained stubborn in refusing to part with its markets/investment banking operations. Its withdrawal from overseas has also been far more selective. Revenues from overseas still comfortably outweighed those generated in the UK during 2018. 

For investors, Brexit and how it impacts the bank and its customers hogs the near-term outlook. More favourably, shareholder returns and a  prospective dividend yield of close to 5% offer attraction. 

Positives

• Its markets/investment bank may win business from the closure of operations at Deutsche Bank
• The historic dividend yield of over 4% (not guaranteed) is attractive
• Barclays passed the Bank of England stress test back in 2018

Negatives

• Operating expenses increased 1% to £6.8 billion
• Management previously made a provision for economic uncertainty arising from Brexit
• Higher interest rates are good for banks. A hard Brexit might see rates being cut

The average rating of stock market analysts:

Buy