Barclays Raises the Bar: New Performance Targets as Pretax Profit Surges

Barclays has set new performance targets for 2025, following a 24% rise in annual pretax profit driven by investment banking income growth and strength in its domestic lending business. The bank's shares initially slid as much as 5.5% in early trading, but analysts attributed this to profit-taking linked to rising costs and UK impairments that missed forecasts. Let's dive into the details and explore what these new targets mean for the bank and its investors.

Barclays reported a profit before tax for the year to December 31 of 8.1 billion pounds ($10.12 billion), slightly above the 8.07 billion pounds average of analysts' forecasts and higher than the 6.6 billion pounds it reported for the year prior. The bank also met its performance targets for 2024, including a return on tangible equity (RoTE) of 10.5% in line with guidance for greater than 10%. Return on equity is a key measure of profitability.

"Our new guidance for 2025, including Group RoTE of around 11%, represents an important next step in the journey towards our 2026 targets, including Group RoTE of greater than 12%," said CEO C.S. Venkatakrishnan, known as Venkat, in a statement.

Analysts at Citi described the results as solid, but noted that there was not much new to excite shareholders. However, they also pointed out that the stock still appears inexpensive in their view, given the strong run-up in the share price over the past year.



Barclays' total income in its investment bank reached 11.8 billion pounds, just above analysts' forecasts for 11.6 billion pounds, as dealmaking and trading activity increased. Revenue from the bank's traditional powerhouse trading business of fixed income, currencies, and commodities (FICC) rose 29% to 934 million pounds in the final quarter of 2024, compared with an average of 29% among Wall Street's top 5 players. Barclays' equities revenue rose 40% to 604 million pounds over the same period, outpacing the average 29% gain at its U.S. rivals.

However, for investment banking fees from M&A deals and fundraising, Barclays reported an 11% increase in income compared with a 35% average at its Wall Street rivals. Despite this, RBC Brewin Dolphin investment manager Zoe Gillespie noted that Barclays is now beginning to deliver a reassuring level of consistency that it hadn't necessarily been known for in the past.

In conclusion, Barclays' new performance targets for 2025 signal a continued commitment to improving operational efficiency and financial performance. By focusing on simplifying its organization, improving returns, and achieving a more balanced capital allocation, the bank aims to deliver increased profitability and more predictable and attractive shareholder returns. As an investor, it's essential to stay informed about these developments and consider how they may impact your portfolio. Keep an eye on Barclays' progress and consider whether their strategic plan aligns with your investment goals and risk tolerance.