Barclays results seen as 'well balanced' by analysts but shares hit by wider sector sell-off

Barclays PLC (LSE:BARC) delivered better-than-expected first-quarter results on Wednesday, though its shares were caught up in a wider banking sell-off as the day progressed.

Analysts described the update as "solid" and "well balanced" across the group’s key divisions.

Profit before tax came in at £2.7 billion, 9% ahead of expectations, while return on tangible equity rose to 14%, up from 12.3% a year earlier.

Jefferies noted that profits were "partly offset by higher impairment charges," and highlighted a "standout" showing from the corporate and investment bank (CIB), where revenue beat forecasts by 9%, "albeit about one-third the beat was driven by leveraged finance gains".

Analysts at Jefferies said Barclays' commentary on UK trends was encouraging, with deposit trends better than normal and current accounts stable.

"Seasonally adjusted, this is a strong performance, and through lower assumed Tesco funding costs and higher structural hedge reinvestment, is what is driving higher UK NII guidance."

Saxo Markets' Neil Wilson said the result "hit all the right notes," with the CIB, like its Wall Street cousins benefiting from increased trading activity in the quarter off the back of exceptional volatility in financial markets.

The strength was not just in the CIB but also the UK consumer division, he said, where income rose 14% and where net interest margin improved to 3.55% from 3.53%.

Capital strength also featured prominently. The CET1 ratio of 13.9% was 30 basis points ahead of consensus and equated to a £1 billion buffer. 

Richard Hunter at Interactive Investor said: "These are fine numbers which again demonstrate the benefits of the group’s diversified business model."

Barclays added a "prudent" £100 million, Hunter noted, to bring its impairment charges to £600 million currently, £74 million of the additional provision relating to the US given rising economic uncertainty.

"In addition, the group is seeing no signs of deterioration across its portfolios and promisingly the level of defaults on its cards in both the US and the UK is broadly stable, which has not led to any immediate alarm bells."

Russ Mould at AJ Bell added: “Three-and-a-half years since his appointment, chief executive CS Venkatakrishnan’s plan for the business seems to be on track.”

Barclays shares initially rose over 3% on the update, extending a strong run that has seen the stock gain more than 11% so far this year and 46% over the past 12 months, but was down 2.6% by mid-afternoon.