Barclays May Use Buyback to Mute Raider Attack, Analysts Say

(Bloomberg) -- Barclays Plc may unveil plans to pay out more money to shareholders to fend off criticism of its investment-banking performance -- and continued pressure from activist Edward Bramson.

That’s a growing view among several analysts ahead of the London-based bank’s earnings report on Feb. 21. Returning surplus capital could be part of a “cohesive strategy to improve returns,” said Shore Capital’s Gary Greenwood.

“Investors should look forward to hearing management’s aspirations around capital return,” said Jefferies’ Joseph Dickerson. Deutsche Bank AG’s David Lock, meanwhile, said that Barclays is in a position to both increase its dividend in 2020 and announce a 500-million-pound ($643 million) buyback halfway through the current fiscal year, though he doesn’t expect such an announcement imminently.

Dickerson pointed to the lender’s first-ever published survey of analysts’ estimates of its share buybacks -- 455 million pounds in 2019 and 720 million pounds in 2020 -- which was released on its website last week.

Bramson, who holds a stake of about 5.5 percent, revealed his shareholding in Barclays last year and began pushing for reductions at the corporate and investment bank, which has reported lower return on equity than other units. Chief Executive Officer Jes Staley has bet his strategy on refocusing and bolstering the investment bank, but the analysts are expecting lackluster results from the division.

A Tough Quarter

“Market volatility during the fourth quarter is likely to have taken the gloss off an otherwise better year,’’ said Greenwood. Several analysts reduced their forecasts for trading revenues from fixed income, currencies and commodities, with Deutsche Bank’s Lock predicting a 15 percent fall compared to last year.

Many investment banks were whipsawed by a year of volatile markets spurred by geopolitical instability and fears over global economic growth. Deutsche Bank’s results on Jan. 31 showed a tough time at its key securities units, particularly in fixed income trading, where revenue slumped 23 percent, but also in equities, which declined 0.8 percent.

Barclays may also need to make an “incremental Brexit uncertainty top-up” to its impairments, like Royal Bank of Scotland Group Plc did in the third quarter, according to Jefferies’ Dickerson.

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