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Over the past five years, Barclays’ (LSE: BARC) share price has more than trebled, comfortably outperforming the 50% gains seen in the FTSE 100. With the bank recently posting another excellent set of numbers, can the momentum continue?
Investment bank
The standout performer for the first six months of 2025 was its Investment Bank. The division reported a 14% year on year increase in income and return on tangible equity (RoTE) improved by 3.4 percentage points to 14.2%. But there were contrasting fortunes across its two main business units within this division.
As market volatility surged in April, clients turned to its investment bankers to execute deals across foreign exchange and rates markets. This helped propel Global Markets income by 34%.
Investment Banking didn’t perform so well. Fees and underwriting fell 10%. Some of this decline was down to a tough comparator last year, where it was involved in a large equity rights issue for National Grid. But putting that aside, economic uncertainty has resulted in corporate America pulling back on deals and IPOs.
Jewel in the crown
Over the last few years the Investment Bank arm has made huge strides in boosting its visibility and credibility. Investments in improving its structural capabilities is now beginning to bear fruit.
Building a world-class investment bank requires the development of a deep set of internal capabilities. As it has built out this division this has enabled it to build deeper client engagement.
For example, of its leading 100 clients, it’s now ranked in the top five with 60 of them. Its target by the end of 2026 is 70.
Such statistics help to explain how it was able to profit handsomely when volatility gripped markets back in April. Indeed, it continues to grow market share from larger US peers, including JP Morgan and Goldman Sachs.
Income streams
Significant volatility, as a result of April’s tariffs announcement, may have helped the investment bank shine, but such a trend quickly dissipated in May and June.
As stated above, income from its investment division didn’t perform so well. Such income comes from its advisory business together with equity capital markets (ECMs) and debt capital markets (DCMs). These banking fees traditionally provide it with more stable sources of income, compared to the more cyclical trading desk.
The question is can the investment bank continue to deliver outsized returns should a protracted period of lower market volatility ensue, but one where large corporate deals remain muted? Should this division’s profits weaken, that would put huge pressure on the bank’s overall financial target of achieving a greater than 12% RoTE by the end of 2026.
Zooming out, Barclays continues to see nothing untoward in either the US or UK economies. In the UK, the credit picture remains benign, with low and stable delinquencies across its crucial credit card business. In the US, the economy remains resilient, with no significant upward trend in unemployment.
I remain cautious though. I remember in the lead up to the 2008 stock market crash, the economy was ticking along nicely, until all of a sudden it wasn’t.
For investors with an appetite for risk, Barclays stock remains one to consider. For me, it’s outside my risk tolerance and so I won’t be buying.
