Barclays profit surged ahead of expectations in the second quarter of the year as market turmoil fuelled a strong performance in its equity trading division.

The FTSE 100 lender said it would launch a new £1bn share buyback after pre-tax profit rose 17 per cent year on year to £6.1bn in the first half of the year. That beat analyst forecasts of £5.9bn.

The bank said income for the three months to the end of June reached £8.2bn, up £2.1bn from the same period last year.

Shares fell 4.8 per cent in early trading to 503.6p, although the stock is still up 5.1 per cent since the start of the year.

Investment bank boost

Barclays’ investment bank benefited from widespread market volatility in the second quarter, which was driven by the conflict in Iran.

Income in the division increased 20 per cent, supported by its global banking business and investment banking fees. Total income from investment banking came in at £3.95bn, ahead of the £3.65bn expected by analysts. Income from equity trading rose 45 per cent year on year to £1.26bn.

That performance lagged Wall Street banks, which recorded an average 69 per cent increase in equities income for the period, helped by the large SpaceX initial public offering that boosted earnings in the US.

Chief executive CS Venkatarishnan, known as Venkat, is seeking to overhaul the lender’s investment banking division and has pledged to reduce its share of group risk-weighted assets.

Chris Beauchamp, chief market analyst at investing and trading platform IG, said: “With the share price sitting at post financial crisis highs there is little room for error for Barclays, but these results provide the reassurance that the group is well-placed for the rest of the year.

“A solid run for the investment banking division helps allay concerns around the size of the motor finance claims, and for now the bigger concern will be how the deeply uncertain outlook for the global economy will play out in the months to come.”

‘Watch this space’

Barclays’ private bank and wealth management arm, PBWM, also reported a five per cent rise in income to £713m, reflecting growth in client balances.

However, the division’s return on tangible equity fell to 26.1 per cent from 33.2 per cent a year earlier.

Venkat said the bank wants PBWM to become “a bigger part of the bank” as it works to reduce its dependence on investment banking and plans further investment in the business.

“Watch this space,” he said.

The bank announced a dividend of 5.9p per share, up from 3p per share in the prior year.

It also raised its 2026 income target to about £31.5bn, citing “robust growth” in its investment banking arm. The upgrade suggests management is more confident in the group’s ability to keep generating earnings across its businesses, even as it tries to rebalance the franchise.

Upgrading targets and Burnham bank tax

Group finance director Anna Cross urged Burnham not to raise taxes on banks amid concerns that the government may impose a substantial bill on the sector.

“UK banks already have the highest rate of tax globally,” she said. “The track record that we and other banks have in terms of supporting UK growth…is really important for the health of the economy and we hope that will be considered.”

Venkat added that while the bank welcomes Burnham’s “commitment to growth”, it wants to use its capital to “support investment and to support growth” rather than pay tax.