Barclays ups performance targets as investors cash in on share price surge

By Sinead Cruise and Chandini Monnappa

LONDON (Reuters) -Barclays raised its 2025 performance targets on Thursday after reporting a better than expected 24% rise in annual pretax profit driven by investment banking income growth and strength in its domestic lending business.

The bank's shares - which had hit their highest since March 2011 on Wednesday - were down 5.7% at 1048 GMT, with analysts citing profit-taking linked to the lender's rising costs and UK impairments, which both missed forecasts.

Barclays is the first major UK bank to report earnings for 2024, a year in which Britain regained domestic political stability but lost the confidence of some international investors after the new Labour government brought in tax increases it said were needed to fix public finances.

Britain surprised markets on Thursday with data showing 0.1% economic growth in the final quarter of last year, offering some respite for embattled finance minister Rachel Reeves.

Barclays Chief Executive C.S. Venkatakrishnan told reporters the UK government was "very, very committed to the growth agenda and how to prosecute it".

"These things take time, and it takes many quarters to see the effects of it," he said. And so I am patient ... but patient with an expectation and confidence."

Venkat last February laid out a three-year plan, which included cutting costs, returning billions of pounds in excess capital to shareholders and investing in its higher-returning UK business, which has helped to the bank's shares rise by more than 100% in the last 12 months.

Barclays said it met its performance targets for 2024, including a return on tangible equity (RoTe) of 10.5% in line with guidance for greater than 10%. Return on equity is a key measure of profitability.

"Our new guidance for 2025, including Group RoTE of around 11%, represents an important next step in the journey towards our 2026 targets, including Group RoTE of greater than 12%," Venkat said in a statement.

Analysts at Citi described the results as solid, but said there was not much new to excite shareholders either.

"...the strong run-up in the share price over the past year may temper any initial reaction, but the stock still appears inexpensive in our view," Citi said in a note to clients.

Barclays reported pretax profit for the year to December 31 of 8.1 billion pounds ($10.12 billion), slightly above the 8.07 billion pounds average of analysts' forecasts and higher than the 6.6 billion pounds it reported for the year prior.

The bank also extended the chairmanship of Nigel Higgins for another three years, as it looks to push ahead with its turnaround plan.

INVESTMENT BANK BOUNCE

The group's investment bank generated just under half of the lender's 26.8 billion pounds of income in 2024, while its UK business and its U.S. consumer bank contributed 8.3 billion pounds and 3.3 billion pounds respectively.

It set aside 90 million pounds to cover possible redress in light of the ongoing Financial Conduct Authority review into historical motor finance commission arrangements. Venkat also pledged an undetermined sum to compensate customers severely affected by recent IT outages.

Barclays' total income in its investment bank reached 11.8 billion pounds, just above analysts' forecasts for 11.6 billion pounds, as dealmaking and trading activity increased.

U.S. bank bosses have also expressed optimism for the year ahead, expecting that tax cuts and deregulation by President Donald Trump will energise businesses and capital markets as well as the economy.

Revenue from Barclays' traditional powerhouse trading business of fixed income, currencies and commodities rose 29% to 934 million pounds in the final quarter of 2024, compared with an average of 29% among Wall Street's top five players, based on a Reuters calculation from earnings reports.

Barclays' equities revenue rose 40% to 604 million pounds over the same period, outpacing the average 29% gain at its U.S. rivals Bank of America, Citi, Goldman Sachs, JPMorgan and Morgan Stanley.

But for investment banking fees from M&A deals and fundraising, Barclays reported an 11% increase in income compared with a 35% average at its Wall Street rivals.

"Barclays is ... now beginning to deliver a reassuring level of consistency that it hadn't necessarily been known for in the past," RBC Brewin Dolphin investment manager Zoe Gillespie said, referring to the group as a whole.

($1 = 0.8004 pounds)

(Reporting by Chandini Monnappa in Bengaluru and Sinead Cruise in London, editing by Andres Gonzalez and Jane Merriman)