Barclays to buy back its shares

Barclays is set to be the first UK high street bank to buy back some of its shares to cream off excess capital and return increased value to shareholders.

But Barclays shares dropped 21p to 726p yesterday as the City reacted nervously - not to the buy-back, but to a 7 per cent rise in underlying costs.

"Barclays appears to be soft on costs now and staff numbers are going up. That gives cause for scepticism," said Terry Smith of brokers Collins Stewart.

Martin Taylor, Barclays' chief executive said a large element in the cost increase resulted from staff training, and he stressed Barclays' determination to invest in improving customer service. Barclays investment banking arm, BZW, saw its first half operating profit fall by 28 per cent to pounds 130m, hit by the fall-off in demand for derivative products early this year.

Despite the current rise in staff numbers, Barclays said the longer-term trend remains downwards, though not on the scale of cutbacks of the early Nineties.

Institutional investors welcomed the share buy-back announcement. "Banks are becoming more frugal with their capital, which is good news. They are not being forced by excess capital into doing irrational deals," said David Rough, group investment director at Legal & General.

The announcement came yesterday as Barclays revealed a healthy 9 per cent increase in pre-tax profits to pounds 1.1bn, helped by big gains on business disposals and a further drop in bad debt provisions. The dividend was increased by 19 per cent to 9.5p, reflecting a strong UK banking performance.

Mr Taylor said the current strong earnings are pushing Barclays' capital ratio "above the top end, so let's cream it off... Introducing a little touch of financial tension into an organisation is no bad thing."

Mr Taylor gave no details on the timing of the buy-back, but indicated that it would be a staged process: "We do not want people to think in terms of immense, one-off sums of money."

The group's Tier One capital ratio, a key indicator of the bank's capital adequacy, had risen to 7.8 per cent, and was expected to go above 8 per cent.

He added that the proposed buy-back effectively ruled out acquisitions for the foreseeable future following the recent purchase of Wells Fargo Nikko, the US asset managers.

Andrew Buxton, Barclays chairman, said the Chancellor should keep interest rates unchanged for the moment in the light of poor consumer confidence and a flat housing market.

"I cannot see that a rise in interest rates would improve that situation," he said, warning the Chancellor against generous Budget tax cuts. "Any tax cuts should be within the scenario of stable interest rates and stable inflation - that is difficult to do."

Comment, above

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Tax Manager / Accountant

£35 - £50k DOE: Guru Careers: A Tax Manager / Accountant (ACA / CA / CTA) is n...

Ashdown Group: Contracts Executive - City of London

£35000 - £37000 per annum + benefits: Ashdown Group: Contracts Executive - Cit...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...

Recruitment Genius: Call Centre Debt Collector - Multiple Roles

£21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

Day In a Page

Giants Club: After wholesale butchery of Idi Amin's regime, Uganda’s giants flourish once again

Uganda's giants are flourishing once again

After the wholesale butchery of Idi Amin's regime, elephant populations are finally recovering
The London: After 350 years, the riddle of Britain's exploding fleet is finally solved

After 350 years, the riddle of Britain's exploding fleet is finally solved

Archaeologists will recover a crucial item from the wreck of the London which could help shed more light on what happened in the vessel's final seconds
Airbus has patented a jet that could fly from London to New York in one hour

Airbus has patented a jet that could fly from London to New York in one hour

The invention involves turbojets and ramjets - a type of jet engine - and a rocket motor
10 best sun creams for kids

10 best sun creams for kids

Protect delicate and sensitive skin with products specially formulated for little ones
Tate Sensorium: New exhibition at Tate Britain invites art lovers to taste, smell and hear art

Tate Sensorium

New exhibition at Tate Britain invites art lovers to taste, smell and hear art
Ashes 2015: Nice guy Steven Finn is making up for lost time – and quickly

Nice guy Finn is making up for lost time – and quickly

He was man-of-the-match in the third Test following his recall to the England side
Ashes 2015: Remember Ashton Agar? The No 11 that nearly toppled England

Remember Ashton Agar?

The No 11 that nearly toppled England
Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks