Global financial markets have been rattled since U.S. tariffs were brought back under President Donald Trump in early 2025. Despite the harsh backdrop, Barclays, the British multinational bank, emerged with stronger-than-anticipated financial results for the first quarter of 2025.
Barclays reported a pre-tax profit for the first quarter that was up by 19% to £2.7 billion, a significant increase from £2.3 billion a year earlier, exceeding the London Stock Exchange Group (LSEG) analysts' expectations of a profit of £2.5 billion.
Trading Activity Fuels Barclays' Performance
The bank's performance was bolstered by a surge in trading activity, particularly in its investment banking business. The total income from the investment bank was up by 16% year-on-year at £3.9 billion, surpassing analysts' expectations of £3.5 billion. This increase in income was primarily driven by a rise in fixed income trading, which saw a 21% increase.
This was largely due to the bank's interest rate-related business and securitized products performing better than expected. This performance put their recent gains at an average of 6%, outpacing what the top five Wall Street banks have to show. In contrast, Barclays' stock trading revenue rose by 9%, which is about a third of the average 32% increase that rivals JPMorgan, Goldman Sachs, Citi, Morgan Stanley, and Bank of America posted.
Following the release of these earnings, shares of the bank grew 0.3 percent in early trading, rebounding from declines earlier in the month. The initial imposition of new U.S. tariffs had sparked fears of inflation and global economic deceleration, to which investors had reacted negatively. However, for the time being, the trading divisions of big banks have been kept busy with market participants adjusting their positions to reflect the changing trade climate.
Barclays' Strategic Focus and Future Plans
In addition to navigating the turbulent global financial landscape, Barclays has also been focusing on strengthening its UK business. The bank has been seeking to expand in the mortgage and consumer lending market. Barclays has been working to reduce costs and concentrate on more steady income streams.
The bank has raised its income target for 2025 to more than £12.5 billion from £12.2 billion, with the majority of the anticipated growth expected to come from its domestic business. In anticipation of potential economic difficulties arising from the U.S. tariffs situation, Barclays has taken a £91 million charge to cover future credit losses.
The majority of this provision is tied to its U.S. consumer and investment banking businesses. Despite ongoing lobbying from others in the banking sector for the scrapping of ring-fencing rules that separate retail and investment banking, Venkatakrishnan has reiterated his support for these regulations, stating that they play a crucial role in protecting consumers' deposits and small businesses.
The first-quarter results from Barclays also indicate progress in its three-year plan to reallocate resources towards more predictable income streams. The bank reported that its capital productivity in the investment banking unit rose by 1.2 percentage points to 7.7%, leading to increased efficiency. This update also positions Barclays as a leading performer this quarter, alongside strong performances from U.S. rivals.
Historically, financial institutions have often been able to weather economic storms by diversifying their income streams and focusing on areas of growth. For instance, during the 2008 financial crisis, many banks were able to stay afloat by focusing on their investment banking divisions, which were less affected by the mortgage crisis.
Similarly, Barclays' current strategy of focusing on its UK business and investment banking division seems to be paying off, as evidenced by its strong first-quarter results.
