Barclays shares sink 5% as the bank expects to earn less interest in the U.K.


Barclays bank reported second quarter earnings Thursday.

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Barclays said Thursday that it expects to earn less interest in its U.K. division, as analysts flagged the bank’s “modestly disappointing” set of results.

The British lender reported a net income of £1.3 billion ($1.68 billion) for the second quarter, in line with expectations, despite slower momentum in investment banking.

Analysts were expecting a net income of £1.4 billion for the quarter, according to Refinitiv. The bank previously reported a net profit of £1.78 billion in the first quarter of the year.

The second-quarter performance was supported by the domestic division and by the consumer and cards arm. Both saw revenues higher in the quarter, up by 14% and 18%, respectively. But, going forward, Barclays said that it expects a lower net interest margin in its domestic bank — meaning that the bank is likely to receive less money from the interest it makes on loans and from the interest it pays on deposits.

In addition, investment banking revenues dropped by 3% on the back of lower client activity.

Shares down after results

Barclays shares dropped 5% in early trade.

C. S. Venkatakrishnan, group chief executive, told CNBC’s “Squawk Box” Europe that the expected decrease in net interest margins going forward is due to some customers using their savings to repay their mortgage loans — this is ultimately a positive for the bank, as it reduces the chances that people will miss their payments.

Venkatakrishnan added that the U.K. consumer is worried, prudent but not under stress.

The UK consumer is worried, prudent, but not under stress, Barclays CEO says

The Barclays team also announced plans for a share buyback of up to £750 million.

“The £750m buyback is the silver-lining in what was a modestly disappointing quarter for revenue,” analysts at Jefferies said in a note.

Here are other highlights for the quarter:

  • Total revenues reached £6.3 billion, down 6% from the £6.7 billion reported in June 2022, which included a £758 million impact of over issuance.
  • CET1 ratio, a measure of bank solvency, stood at 13.8%, up from 13.6% from the previous quarter.
  • Operating costs dropped 6% from a year ago.

Venkatakrishnan said in a statement: “We have positioned Barclays carefully for this mixed macroeconomic environment and delivered a consistent performance in the second quarter.”

“Looking forward we are very confident of meeting our targets for the full year,” he added.


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