In positive news for UK based bank Barclays, its second-quarter pre-tax profit shot up 44% to £2bn, and its beleaguered investment arm also showed good figures.
With income up 10% to £5.6bn, costs down 3% to £3.3bn and its return on equity figures currently at 12.3%, it has been a good three months for the bank, which is finding its feet again after dealing with scandals such as the Libor rigging affair over the last few years.
Increased worldwide volatility in the marketplace has allowed Barclays’ investment arm to turn around its performance, which is up 11%. Derivatives and equity financing have buoyed the sector as it faces pressure from activist investor Edward Bramson.
Bramson has been taking potshots at Barclay’s investment bank and wants to shut down most trading activity to reduce capital costs and boost returns to shareholders.
Hargreaves Lansdown Senior Analyst Laith Khalaf said that Barclays’ Q2 results would certainly help the bank “fend off the advances” of Bramson but did warn that “anyone can make hay when the sun is shining”, noting that the US investment sector as a whole is currently burgeoning.
A large decrease in conduct and litigation costs also helped Barclays achieve good Q2 figures, dropping down to £81m from a massive £715m the year before.
Barclays’ CEO Jes Staley wrote in his half-year report that this performance “underlines the growing pace of delivery at Barclays” and has “addressed the challenges of the last decade”.
Conduct and litigation costs also hit pre-tax profit for the first half of 2018, dropping it by 28% to £1.6bn. Excluding these costs, profit increased by 20% to a value of £3.7bn.
Joseph Dickerson and his team of fellow analysts from Jefferies mentioned that the results gave Barclays a “much better impairment performance and solid delivery against business segments”. He also said that the analysts “see consensus drifting higher despite a mixed cost guide”.
Despite the positive turnaround for the bank, its shares fell by 0.3% half an hour after trading began on the London Stock Exchange.
Meanwhile, Barclays has agreed to take a minority stake in MarketInvoice, an online invoice financing platform.
Set to roll out to Barclays’ SME customers, MarketInvoice has been in operation since 2011 and has delivered funding for invoices and business loans to the tune of £2.7bn since its debut. Barclays is the first bank in the UK to take a step in this direction.
The bank hopes that the introduction of the service will alleviate cash flow problems for small businesses, which can often make the difference between barely surviving and flourishing. Any company with outstanding invoices will now be able to synchronize invoices to the MarketInvoice platform and get funding from investors to tide them over in the funding gap.
Planned for a full rollout in 2019, Barclay’s MarketInvoice trials will take place in various locations in the UK later this year.
Ian Rand, CEO of Barclays Business Bank, said: “Invoice finance is a product that has come of age in the digital era; it’s efficient, effective and controllable for small businesses.”