Barclays Earnings Set to Soar

Investors are waiting for the earnings report of Barclays, the first major UK bank to report, to gauge if the bumper quarter witnessed in the last quarter will continue.

Higher Interest Rates, Higher Earnings

Barclays has had a solid start to the year, surging over 14% in less than six weeks of trading. This continues an upward trend that has seen the lender more than double its stock price over the past year. However, such gains imply that investors have set high expectations for earnings to justify the rise and expect continued growth throughout 2025. While IT glitches affecting UK banks have recently gained attention, they are unlikely to impact the earnings report.

Analyst consensus, when Barclays reports before the market opens on Thursday, shows a staggering £989 million profit for the final quarter of 2024, a substantial improvement from the -£100 million recorded in the same period last year (impacted by £552 million in impairments). This growth is attributed to a reduction in provisions and strong performance in the investment banking division. Investors will likely want to monitor the bank’s exposure to the mortgage lending market as the BOE moves towards lower interest rates in 2025. While home sales in the UK have seen a sluggish uptick, which might have slowed the bank's growth, further rate cuts could stimulate the housing market and support its income in the coming months.

Promising Signs for the Future?

Investors will also be on the lookout for the possibility of Barclays announcing a new share buyback programme, with estimates suggesting it could be as high as £1.8 billion, approximately 4% of outstanding shares. Barclays' rivals in the US have already reported strong returns for Q4, and analysts project that Barclays will deliver a similar performance.

Still, economic uncertainties could weigh on the outlook, especially if management adopts a more cautious stance and sets aside additional funds as provisions. Previously, Barclays stated that improved conditions for M&A had increased profits, but with the British economy facing headwinds, the bank might rely more heavily on its US business, where it has a larger exposure. Conversely, interest rates in the US are expected to remain higher than in the UK, potentially benefiting the bank. Investors could be particularly interested in commentary to understand the bank's own perspective on interest rates in its two main markets and the potential impact on its bottom line.

Barclays Above Triangle

Barclays reveals a completed ascending triangle pattern, suggesting a potential measured-move projection of 315 GBX in the short term. An upbeat report could attract traders' attention, who may view it as a bullish signal and extend the upward leg towards the larger 325 GBX round resistance. On the other hand, losing the support at 300 GBX, which formed at the upper triangle trendline, could open the door to 285 GBX, and in turn, this would expose the floor at 275 GBX.

Source: SpreadEx / Barclays

Key Takeaways

Investors await insights into Barclays’ performance, including potential share buyback programme and management's outlook on economic conditions and interest rates in both the US and UK. While challenges remain, Barclays’ strong start to the year and expectations for strong earnings have set a high bar, making this earnings release an important event for short—and medium-term stock price performance.