Barclays reported strong first-quarter earnings, outperforming analyst expectations on both revenue and profit. However, the British lender faces increasing pressure from rising global trade tensions and potential economic slowdown, especially given its significant exposure to U.S. markets.
Barclays Tops Expectations with Investment Banking Strength
The bank posted a pre-tax profit of £2.7 billion ($3.6 billion), an 11% increase year-over-year and ahead of analysts’ forecast of £2.49 billion. Group revenues reached £7.7 billion, driven by a 16% rise in investment banking income to £3.87 billion — its most profitable division. The bank’s return on tangible equity climbed to 14%, a marked improvement from 7.5% in the previous quarter.
Barclays shares gained 2% in early London trading following the results.
Trade Tariffs and U.S. Exposure Weigh on Outlook
Barclays’ U.S. operations — a legacy of its acquisition of Lehman Brothers’ investment banking arm — face increased scrutiny amid the Trump administration’s aggressive global tariff strategy. These geopolitical developments have introduced volatility and could deter corporate and consumer decision-making, according to CEO C.S. Venkatakrishnan.
He warned of “fairly high market volatility” ahead and noted that while this can benefit trading income, it also adds pressure on clients’ willingness to act in uncertain environments.
CEO: Uncertainty Could Dampen Economic Activity
In an interview with CNBC, Venkatakrishnan emphasized the dual nature of market volatility — both as a risk and a revenue opportunity. He noted that uncertainty is prompting both businesses and individuals to delay decisions, raising concerns of a broader economic slowdown in key markets like the U.S. and U.K.
Despite solid performance in Q1, he stressed the need to prepare for various scenarios, citing potential weakness in both regions.
Mixed U.S. Consumer Banking Results Reflect Broader Tensions
Barclays’ U.S. consumer bank posted a 9.1% return on tangible equity, more than double the prior year’s 4.1%. Income in the unit edged up 1% to £864 million, but pre-tax profit declined 7% to £55 million. Analysts at RBC Capital Markets noted that while income drove the profit beat, higher impairments offset some of the gains.
They also cautioned that Barclays’ deep ties to U.S. consumer and investment banking could lead to greater share price pressure compared to other U.K. banks, especially if trade war rhetoric escalates.
UK Operations Gain Momentum as Competitors Retreat
Barclays’ U.K. consumer bank performed strongly, with a 12% increase in income to £484 million and a 23% jump in pre-tax profit to £207 million. The growth was bolstered by its acquisition of Tesco Bank.
Meanwhile, rival HSBC is scaling back its M&A and equity capital market operations across the U.K., U.S., and Europe. Banco Santander’s U.K. arm also announced potential redundancies for 750 staff and plans to close 95 branches by mid-2025, raising questions about its long-term presence in the British retail banking sector.
Post-Brexit Trade Tensions Create Diverging Opportunities
While much of Europe faces 20% U.S. tariffs, briefly suspended, the U.K. currently faces only 10%, potentially giving it a competitive edge in negotiating transatlantic trade terms. Nonetheless, expectations of a global trade and economic slowdown temper optimism, and Britain’s broader growth outlook remains cautious.
Will Global Trade Frictions Undermine Banking Gains?
Despite Barclays’ resilient Q1 performance, the looming risk of prolonged trade conflict and economic uncertainty casts a shadow. Can the bank continue to outperform amid policy shifts, volatility, and shifting global trade dynamics?
