Barclays PLC (LSE:BARC) delivered a "solid" first quarter, analysts said, but rising loan losses and macro uncertainty are understandably dominating the market reaction.
The lender reported profit slightly ahead of expectations, with strong performance in its investment bank, particularly in markets trading and fees.
Analysts at Jefferies said the results were “refreshingly in line” and described the update as “solid enough, no fireworks”.
Jefferies said the balance sheet was slightly weaker, with hedge movements and share award costs knocking TNAV down to 405p, below expectations, while also trimming capital, leaving the CET1 ratio at 14.1%.
As a consequence, the group has announced a £500 million share buyback, a touch lighter than the City consensus at £614 million.
Attention also shifted to credit quality. AJ Bell’s Russ Mould said investors were focusing on “higher loan losses”, with impairment charges reaching £823 million, the highest since 2020. He added that this had weighed on tangible net asset value, a key valuation measure.
Shore Capital felt Barclays’ valuation remained attractive, noting the shares trade at 1.05 times book value versus a return target above 14%.
But the broker warned that “increased macro uncertainty associated with the war in Iran does increase uncertainty around medium-term delivery”.
There are offsets, said analyst Gary Greenwood, as higher market volatility is supporting trading income, while interest rate expectations could lift margins over time.
For now, analysts see a broadly steady picture. Jefferies said there was “no change in guidance”, which it viewed as a modest positive given headwinds.
The key question is whether credit issues prove temporary or signal a broader deterioration as economic conditions evolve.