Complex Barclays gets benefit of the doubt

Keeping Barclays on track is a complex task, but one that the bank is just about staying on top of.

As Barclays (LSE:BARC) ploughs through its to-do list with fluctuating degrees of success, the task of keeping such a complex business on track are clearly evident. A number of the key metrics weakened in the period and an underlying pre-tax profit decline of 14% is the result.

The bank has decided that in light of the challenging income environment, it is better served concentrating on costs for the rest of the year which, while prudent, is something of a disappointment.

The Return on Tangible Equity figure of 9.4% is decent yet unexciting, the cost/income ratio nudged higher to 63% from 61% (and is in stark contrast to the sub-46% number from Lloyds Banking Group (LSE:LLOY)), and the UK is facing pressure on margins.

In addition, credit impairments have jumped concerningly by over 60%, the Investment Bank remains under some pressure - as does Corporate and International in general -while a no-deal UK exit would also impact negatively.

There are some positives emanating from the update, such as the cosmetic boost given to the numbers by a lack of repeating litigation and conduct charges from the comparable period.

Given Barclays' recent track record, it is too early to call whether these generally lower charges will become the norm.

Meanwhile, the capital cushion is perfectly adequate at over 13% and the consumer, cards and payments part of the business continues to make a worthwhile contribution while exhibiting further growth.

The digital part of the bank has already gained traction and is becoming entrenched within the UK business, which should ultimately relieve some cost pressures.

In the meantime, the increase to the dividend signals management confidence in prospects and underpins an existing yield of 4.2%, with the possibility of share buybacks still on the cards, should the environment allow.

Barclays seems to be making progress on a complicated transition, while managing its complex business. The initially positive reaction to the numbers signals some relief from more recent woes, where the share price has declined by 21% over the last year, as compared to a 0.9% dip for the wider FTSE 100.

There is probably enough within the update for investors to continue to give the bank the benefit of the doubt, such that the market consensus of the shares as a buy is likely to remain intact.