Are Barclays shares a no brainer purchase as first-half income bounce by £1bn?

Barclays (LSE: BARC) shares have dipped barely this morning though the FTSE 100 financial institution beat expectations with a £1bn bounce in first-half income and cheered shareholders with one other bumper spherical of capital returns.

I anticipated higher as in the present day’s (29 July) numbers look robust throughout the board. So did traders anticipate much more after its current stellar run? Seems prefer it.

The group’s revenue earlier than tax rose 28% to £5.2bn, with earnings per share up 41%, reflecting revenue progress and the impression of share buybacks.

Return on tangible fairness hit 13.2%, beating the board’s 2026 goal of 12%, whereas its internet curiosity margin jumped from 3.15% to three.55%. These are strong indicators that the enterprise is doing what it got down to do, enhance efficiency, enhance returns and run a tighter ship.

Its funding banking division delivered a 13% rise in first-half earnings to £7.1bn, because of a revival in international market buying and selling. Nonetheless, dealmaking charges fell 16% to £568m in Q2, as main enterprise strains posted a decline. This solid a shadow on the outcomes

FTSE 100 rocket

The financial institution additionally introduced one other £1bn share buyback and lifted its dividend payout, pushing whole capital distributions for the half to £1.4bn, up 21% 12 months on 12 months.

Barclays shares have climbed 56% over the previous 12 months however commerce on a price-to-earnings ratio of simply over 10. That appears low cost, contemplating the standard of those outcomes. The value-to-book ratio of simply 0.71 additionally suggests worth. To my thoughts, that creates a doable alternative for long-term traders.

The low dividend yield could put some off. On a trailing foundation, it’s 2.33%, beneath Lloyds or NatWest. That’s partly because of the rocketing shares. And the board prefers to reward traders by share buybacks, which boosts dividend per share progress by share depend discount.

So the H1 dividend crept up only a tenth of a penny (from 2.9p to 3p). That’s nonetheless an increase of three.45%, so not too shabby. Personally, I’d fairly obtain the next dividend, however traders must resolve for themselves what they worth extra.

Progress, earnings and buybacks

Funding banking could be unpredictable, particularly in periods of worldwide instability. It’s been a blessing this time, however might be a drag if markets flip. There’s additionally political threat at residence. Chancellor Rachel Reeves is underneath stress to slap new taxes on the banks. As we speak’s bumper outcomes will improve that.

One other concern is that the financial institution’s price base is rising, up 5% 12 months on 12 months. A few of that is right down to the Tesco Financial institution acquisition, however inflation and funding prices additionally performed a component. The fee-to-income ratio’s not off course, enhancing from 63% to 59%, so administration does seem to have this underneath management.

I don’t assume the window of alternative has fully closed simply but. Sure, shares have ralllied laborious, however the valuation nonetheless appears interesting and the financial institution is executing properly on its technique. Market sentiment in the direction of the banking sector has shifted over the previous 12 months and Barclays stands to profit additional if this continues. The largest problem seems to be excessive investor expectations.

I nonetheless thinks Barclays is one to contemplate shopping for for these keen to just accept a bit extra threat in pursuit of larger long-term rewards. It’s not fairly a no brainer, however what inventory is?