Barclays beats expectations after Tesco Bank takeover
Barclays surpassed analyst expectations in its annual results report on Thursday, after a strong year for its investment banking arm and day one benefits of its Tesco Bank takeover.
The FTSE 100 bank reported a pretax profit of £1.7bn in the fourth quarter, ahead of the £1.62bn expected by analysts.
For 2024 as a whole, the lender booked a profit of £8.1bn, ahead of the £8.07bn expected.
This marked a 24 per cent increase from £6.6bn in 2023.
Its acquisition of Tesco Bank’s retail banking business, completed on November 1, 2024, helped the group’s UK income rise nine per cent overall.
This primarily reflected the £0.6bn day one gain from the takeover, sending pre-tax profit of its UK arm soaring 25 per cent over the last year.
The acquisition included transferring credit cards, unsecured personal loans, deposits, and the associated operating infrastructure to Barclays Bank.
Barclays UK recorded a £3.58bn pre-tax profit for 2024, compared with £2.87bn in 2023.
Barclays’ investment bank continued its strong performance throughout the year, with its total income for 2024 reaching £11.85bn, passing the £11.7bn analyst estimate.
Its investment banking arm also enjoyed seven per cent year-on-year income growth after raking in £4.5bn in fees and commission income. Income from these divisions rose 26 per cent compared to the prior year.
Its net interest margin expanded by 46 basis points, compared to the same quarter last year, with its fourth quarter for 2024 hitting 3.53 per cent.
Group operating expenses were down one per cent year on year, at £16.7bn, which the lender said was partially offset by inflation, investment spend and business growth enabled by £1bn of cost efficiency savings.
The bank also announced a share buyback of up to £1bn, expected to begin in the first quarter of 2025.
AJ Bell investment director Russ Mould said: Mould added: “Something like a return to ‘normal’ interest rates and bond yields, after fifteen years of zero interest rates and several bouts of Quantitative Easing, is helping Barclays’ net interest margin in the UK no end.”
“Something like a return to ‘normal’ interest rates and bond yields, after fifteen years of zero interest rates and several bouts of Quantitative Easing, is helping Barclays’ net interest margin in the UK no end,” Mould added.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: “Early price action for Barclays looks a little harsh after the group set a decent benchmark for the banking sector, closing the year with an impressive final quarter as both its UK and Investment Banking arms delivered.”
“In Investment Banking, Barclays didn’t disappoint, surpassing profit expectations and seeing growth in fixed income and equities that outpaced even the US giants,” he added.
On the announced buy-back, Britzman said it taps into “strong capital position” and there was “enough on offer to keep all markets happy”.
“The only minor downside was the lack of guidance upgrades, but overall, investors should be pleased with these results, the immediate price reaction likely a result of the strong run up coming into results,” he said.
Zoe Gillespie, investment manager at RBC Brewin Dolphin, said: “Barclays has delivered another strong set of results”.
“The bank is seeing the benefits of its divisional spread and a coherent and focused long-term strategy,” she added.
“Barclays is in a strong position and looks likely to remain so for the foreseeable future, with the bank now beginning to deliver a reassuring level of consistency that it hadn’t necessarily been known for in the past”.
Group chief executive C.S Venkatakrishnan said: “In 2024 we met our financial targets, delivering for our customers and clients, with operational and financial performance improvement driven by disciplined execution of the three-year plan.”
He added: “We have also announced a share grant for our colleagues to further align their work with shareholders’ interests and enable them to benefit tangibly from the firm’s progress and success.”