Barclays’ investment banking arm is ‘firing on all cylinders’ after posting a record income earlier this morning.
The division’s success has helped the bank to soften the financial impact of the Covid-19 pandemic, which hit profits repeatedly in 2020.
John Moore, senior investment manager at Brewin Dolphin, deems the success of Barclays’ investment division ‘ironic’ for activists who had called for its sale.
“At a time when the retail side of Barclays has seen a significant fall in income, the experience of the past 12 months validates the bank’s argument that it should have both retail and investment banking arms,” Moore said.
Barclays reported a pre-tax profit of £3.1bn in 2020, a 30 per cent drop on the previous year.
Profit for the fourth quarter fell more sharply, plummeting from £1.1bn to £0.6bn, while total yearly income was flat at £21.8bn.
This was offset by a strong performance in Barclays’ investment bank, which benefited from a surge in trading volumes early in the year.
Income from this division rose 22 per cent to £12.5bn, accounting for more than half the bank’s income.
Richard Hunter, head of markets at Interactive Investor, said that Barclays’ resilience sets the bar high for its rivals.
“In all, the performance is dogged, set against an extraordinary backdrop,” he said.
“There is light at the end of the tunnel given the bank’s financial strength and diversity, and Barclays is currently the preferred player in the sector, with the market consensus of the shares as a buy reflective of recovery prospects.”
Barclays will resume its annual dividend as its profit suffered a less severe hit from the pandemic than expected.
It announced a dividend of 1p per share, as well as £700m share buyback.
The bank, alongside other major high street banks, has been hit with extra credit impairment charges due to the economic impact of the pandemic.
It set aside £4.8bn for bad loans in 2020, more than double the amount of the previous year.
Susannah Streeter, senior investment analyst at Hargreaves Lansdown, believes Barclays has dodged Covid blows with its strong trading arm.
“Barclays has come out from the Covid corner fighting, but it will need to stay fit, lean and focused to withstand the unpredictable test ahead,” she said.