Barclays shares fall on disappointing results: Here's how four City analysts reacted

 
Emma Haslett
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The results suggested Barclays' investment arm struggled in the third quarter (Source: Getty)

It was a tale of two banks for Barclays today, which unveiled £1.1bn profits, but a weak performance in its investment bank.

Shares in the lender sank more than six per cent in early trading after its third-quarter results added fuel to some analysts' arguments its investment bank should be shrunk. Here's what City analysts had to say:

Read more: Barclays shares fall despite profits jump as trading arm struggles

1. Touch and go

"This is the first time Barclays has reported since getting rid of its bad bank, but anyone who hoped this might simplify its financial reporting will be sorely disappointed.

"Peering through the murk, the good news is that PPI costs are falling out of the equation, and there’s maybe a hint of a dividend increase coming next year. Aside from that the UK business has largely tracked sideways, while in the international business there’s been a big dip in revenues from trading activities in the investment bank.

"Litigation still remains a risk for Barclays, with more than 20 separate investigations ongoing, not least one relating to CEO Jes Staley’s attempt to uncover a whisteblower in his own ranks. However like Lloyds, Barclays has made no further provisions for PPI in the third quarter, despite the FCA kicking off a high profile advertising campaign.

"After making some good progress, Barclays appears to be stalling somewhat and it’s now touch and go whether the bank will break even in 2017."

- Laith Khalaf, Hargreaves Lansdown

2. No relief

"Barclays investors have already endured a torrid time in 2017, and today’s [statement] offers no relief at all. Profit before tax of £1.1bn is a 23 per cent miss vs consensus (£1.4bn), or 11 per cent if we (generously) take out a £168m impairment tied to a US cards portfolio sale [in the first quarter].

"The Investment Bank does the damage with (like-for-like) markets income down 31 per cent year-on-year and Credit/Macro down 25 per cent. Performance within the UK business appears broadly stable, if not spectacular. We think that substantially all the 'damage' came from within the international division."

- Ian Gordon, Investec

3. Well below expectations

"Barclays may have reported third quarter profits [up] 40 per cent, helped by lower litigation and provisions, but it has nonetheless disappointed. Total income and net operating income were not quite as high as consensus had hoped, with bond, FX and commodity trading down 34 per cent amid muted volatility. This was even weaker than EU/US peers have announced. Operating costs were also a little too high while the Core Tier One capital adequacy ratio showed no improvement.

"However, the real clanger, and likely reason for the share price drop, is pre-tax profits of ‘just’ £1.1bn. This was well below consensus expectations of £1.4bn, helping send the shares back sharply from yesterday’s bullish flirt with 198p and the ceiling of a falling channel in place since February.

"Bears will be looking for another leg lower to the channel floor and November 2016 lows at 175p. Bulls may have to be content with any foray back towards the channel ceiling, needing something special for a breakout."

- Mike van Dulken, Accendo Markets

4. Credit where it's due

"Barclays has published a disappointing [third quarter] update ... We view this as a reflection of difficult operating conditions during the period, reflecting low volatility, as against a structural issue.

"That said, it will no doubt give fuel to those who feel that Barclays should be shrinking its exposure to this division. The only adjusting item during the quarter was a £168m impairment in respect of deferred consideration on the first quarter 2017 US card asset sale.

"While the results are disappointing, we view this as simply down to quarterly volatility associated with weak market conditions, and would therefore not extrapolate. We believe that Barclays’ shares continue to give no credit for management’s ability to improve performance over the medium-term, suggesting significant upside potential if they can deliver."

- Gary Greenwood, Shore Capital

Read more: Banks will never regain pre-crisis heights says ex-Barclays boss Jenkins

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