Barclays Shares Slump After Revenue Miss, Guidance Cut

During a challenging week for U.K.-headquartered banks, Barclays experienced a significant 7% decline in its shares on Thursday. The bank reported revenue that fell below market expectations and also revised its margin guidance.

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Barclays reported a notable 31% rise in pretax profit, reaching £1.96 billion, which surpassed the £1.91 billion consensus estimate. This result was achieved by taking fewer impairments than analysts had projected. However, the bank's income witnessed a decline of 6%, amounting to £6.29 billion, falling short of the consensus figure of £6.53 billion.

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Analysts highlighted the new guidance regarding the U.K. net interest margin for the year, which is now expected to be below 3.2%, compared to the current estimate of 3.15%. Barclays attributed this development to factors such as customers holding lower deposit balances and changes in deposit pricing. Notably, customers in the U.K. appear to be using excess deposits to pay down mortgages ahead of their re-fixings, as mortgage rates in the country have surged.

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Barclays reaffirmed its commitment to maintaining a significant presence in corporate and investment banking, which currently accounts for 60% of its risk-weighted assets. CEO C.S. Venkatakrishnan emphasized the strategic importance of the investment bank and acknowledged the need to focus on growing other areas outside of the investment bank to achieve a better overall balance.

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Within the corporate and investment banking division, Barclays expressed its intent to invest in less-capital intensive areas. However, the revenue volatility of the fixed income, currency, and commodities division and equities division has been noted as higher compared to its peers in the U.S. and Europe. This volatility, coupled with the market's perception of lower multiples on these revenue streams, poses challenges in rewarding market share gains in the FICC segment.

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During the same week, other U.K. banks also faced challenges. NatWest shares slumped by 7% as its CEO resigned, and Lloyds stock weakened by 3% after its pretax profit missed analyst estimates.

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