Analysts from Bank of America assign a 'buy' recommendation to Barclays' shares.
Fired-Up Bank of America Analysts Sing Praise for Barclays' Impressive Q1 Showing
Bank of America analysts can't help but sing the praises of Barclays' first-quarter performance, maintaining their 'buy' rating on the lender's stock.
Despite geopolitical concerns ahead of the results, the FTSE 100 bank exceeded expectations, registering a whopping £2.7 billion pre-tax profit, ahead of the £2.5 billion analysts had predicted.
This impressive performance was propelled by a 16% surge in income from its investment arm, racking up £3.9 billion in revenues.
The surge was primarily driven by increased transactional activity in global markets due to numerous share sell-offs ahead of President Donald Trump's controversial tariffs on trading partners.
Analysts noted, "The investment bank, particularly the markets business, captured the opportunities in the quarter. There were no signs of stress in the underlying credit quality within the US Consumer business."
Barclays' Stock Recovered Post-Tariff Panic
Confronting elevated US macroeconomic uncertainty, Barclays bolstered its reserves for bad loans to £74 million. Being heavily exposed to geopolitical tensions, Barclays' shares took a significant hit following Trump's 'Liberation Day.'
Fearing a global trade war, China retaliated against the US, crippling Barclays' shares which plummeted a knee-buckling 9%.
However, following Trump's retreat on tariffs, Barclays has made a strong recovery, regaining nearly all its losses and trading even with its price from the previous month.
Bank of America analysts raised their 2025 estimated income for Barclays by approximately 1% to £28.8 billion, attributing the increase to the bank's strong first-quarter performance.
Despite the upgraded revenue forecast, analysts have left future year forecasts unchanged due to the performance being primarily driven by the investment bank.
They project underlying profit before tax to come in at £9.1 billion for the year.
Analysts have flagged the looming motor finance judgment as a potential downside risk for the bank, with commission redresses being a major concern should they be higher than expected.
Barclays has put aside £90 million for the car mis-selling scandal, with the Supreme Court expected to deliver a ruling on the use of discretionary commission agreements in early summer.
If an adverse judgment is handed to lenders, the Financial Conduct Authority has promised to implement a redress scheme within six weeks.
- The strong recovery of Barclays' stock, following Trump's retreat on tariffs, is a testament to the resilience of the banking industry in the face of geopolitical tensions.
- The 1% increase in Barclays' 2025 estimated income, as suggested by Bank of America analysts, is due largely to the impressive performance of the bank's investment arm in the first quarter.
- The potential downside risk for Barclays remains the motor finance judgment, with commission redresses being a major concern, especially if they turn out to be higher than expected.
