Barclays smashes expectations as it reaps Tesco Bank takeover rewards

Barclays has exceeded analyst expectations in its annual results report, following a robust year for its investment banking division and immediate benefits from its acquisition of Tesco Bank.

The FTSE 100 bank posted a pretax profit of £1.7bn in the fourth quarter, surpassing the £1.62bn anticipated by analysts, as reported by City AM.

For the entire year of 2024, the bank reported a profit of £8.1bn, exceeding the expected £8.07bn. This represents a 24 per cent increase from £6.6bn in 2023.

The completion of the Tesco Bank’s retail banking business acquisition on November 1, 2024, contributed to a nine per cent overall rise in the group’s UK income.

This primarily reflects the £0.6bn immediate gain from the takeover, which boosted the pre-tax profit of its UK division by 25 per cent over the past year.

The acquisition involved the transfer of credit cards, unsecured personal loans, deposits, and the associated operating infrastructure to Barclays Bank.

Barclays UK reported a pre-tax profit of £3.58bn for 2024, compared with £2.87bn in 2023.

Barclays’ investment bank maintained its strong performance throughout the year, with its total income for 2024 reaching £11.85bn, surpassing the £11.7bn analyst estimate.

Its investment banking division also saw a seven per cent year-on-year income growth after generating £4.5bn in fees and commission income.

Income from these divisions rose 26 per cent compared to the previous year. Its net interest margin expanded by 46 basis points, compared to the same quarter last year, with its fourth quarter for 2024 hitting 3.53 per cent.

Operating expenses for the group decreased by 1% year-over-year to £16.7 billion, which the bank attributed to being partially offset by inflation, investment spend, and business growth enabled by £1 billion in cost efficiency savings. Additionally, a share buyback of up to £1 billion was announced, expected to commence in the first quarter of 2025.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, commented: "Early price action for Barclays looks a little harsh after the group set a decent benchmark for the banking sector, closing the year with an impressive final quarter as both its UK and Investment Banking arms delivered."

"In Investment Banking, Barclays didn’t disappoint, surpassing profit expectations and seeing growth in fixed income and equities that outpaced even the US giants," he added. Regarding the announced buy-back, Britzman stated that it taps into a "strong capital position" and there was "enough on offer to keep all markets happy".

"The only minor downside was the lack of guidance upgrades, but overall, investors should be pleased with these results, the immediate price reaction likely a result of the strong run up coming into results," he said. Zoe Gillespie, investment manager at RBC Brewin Dolphin, commented: "Barclays has delivered another strong set of results".

"The bank is seeing the benefits of its divisional spread and a coherent and focused long-term strategy," she added.

The narrative around Barclays paints a picture of robust health, with the bank showing signals of sustained strength for some time to come, demonstrating a reassuring level of consistency not always associated with its past.

Group chief executive C. S Venkatakrishnan commented: "In 2024 we met our financial targets, delivering for our customers and clients, with operational and financial performance improvement driven by disciplined execution of the three-year plan."