Barclays PLC (LSE:BARC) shares fell over 3% on Tuesday morning despite the lender reporting an improvement in first-quarter income and profit, as a strong performance from its investment bank was slightly offset by motor finance compensation and a £228 million loss from the collapse of mortgage lender MFS.
The FTSE 100 bank's total income rose 6% to £8.2 billion, just ahead of consensus forecasts of £8.1 billion.
Attributable profit came in at £1.9 billion, slightly below the £1.95 billion consensus, while profit before tax increased to £2.8 billion from £2.7 billion a year earlier.
Return on tangible equity was 13.5%, down from 14.0% last year but still in double digits across all divisions.
The UK lender said growth was driven by broad-based performance, including its investment bank, where income exceeded £4 billion for the first time in a quarter.
Costs were tightly controlled, with the cost-to-income ratio improving to 56% from 57%. The loan loss rate rose to 74 basis points, reflecting a £0.2 billion single-name impairment.
Barclays was one of a small handful of lenders exposed to MFS, a specialist bridging and buy-to-let lender, which fell into administration last month. Following this, Barclays CEO CS Venkatakrishnan indicated a shift away from similar high-risk lending.
Net interest income excluding the investment bank and head office rose 12% to £3.4 billion, keeping the group on track to meet its full-year guidance.
Barclays also announced plans for a further £500 million share buyback, following completion of an existing £1 billion programme.
The CET1 capital ratio stood at 14.1%, or 13.9% on a pro forma basis including the new buyback, remaining at the top end of its 13-14% target range.
Shares in the lender fell over 3% to three week lows below 415p in early Tuesday trading, before losses were pared to 420p in late morning.
Analysts at brokers Jefferies and Shore Capital said the results were "solid", broadly in line with expectations.
Jefferies said: "In the context of Barclays' usually complicated numbers, the income statement is refreshingly in-line. There are plenty of moving parts, including a £105 million motor finance provision (not in consensus), £228 million on MFS (looks to have been largely in consensus) and an ECL [exepected credit losses] build of £101 million (albeit offset £81 million by release of US tariff adjustments)."
Capital generation was "healthy", Shore Cap said, with CET1 above the top end of the target range, supporting the announcement of a further buyback.
Divisional profitability was slightly mixed, Shore Cap said, with the UK Corporate Bank beating expectations, supported by strong operating leverage and very low credit costs; the Investment Bank modestly outperformed consensus, with robust markets and investment banking fee income more than offsetting elevated impairments relating to MFS; the US Consumer Bank was notably ahead of expectations, driven by strong margin expansion, positive operating jaws and lower-than-forecast credit costs; Barclays UK was weaker than expected, as higher impairments and investment spend offset solid income growth; Private Bank & Wealth Management also underperformed expectations, reflecting higher costs and a lower impairment release; Head Office was weaker, driven by a larger-than-forecast motor finance provision.
** UPDATE: Adds share price and broker comments **