Barclays’ bounce won’t last

Barclays shares rose by 7% after it delivered “forecast-beating profits”. But the surge could be running out of steam.

Despite a “once-in-a-lifetime crisis”, Barclays has delivered “forecast-beating profits”, says Ben Marlow in The Daily Telegraph. That is due to its investment bank, which is “firing on all cylinders”. The shares rose by 7% on the news.

With boss Jes Staley pledging to “hang around for several years yet”, it looks as though activist shareholder Ed Bramson’s “hostile” campaign to get rid of Staley and move Barclays away from investment banking has been a “complete failure”. 

The latest results show the benefit of having a “diversified business model” rather than narrowly focusing on retail banking.

Not so fast, says Lex in the Financial Times. Over the past year Barclays’ share price has largely been determined by the performance of the overall European banking sector, which has been hit by fears of a second lockdown. So, unless bond yields change tack and rise, pointing to “strong economic recovery”, it is “hard to see” the stock rising further.

Indeed, the “surging” investment bank may already be “running out of steam”, with sales in the last quarter 16% below the average of the two previous quarters, says Liam Proud on Breakingviews. What’s more, a few good quarters don’t make up for the “sub-par” returns that it has generated over the past few years. Over the last 19 quarters the unit actually “destroyed” value due to its low return on equity. With the board already engaged in “succession planning”, a candidate “less attached” to the markets business would be the best choice to succeed Staley.

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