(This August 1 story amends capitalisation of Tradeweb in para 17)
By Lawrence White and Iain Withers
LONDON (Reuters) - Barclays (BARC.L) raised its interim dividend by 20% on Thursday thanks to a more resilient performance at its trading unit and an absence of regulatory fines that have blighted past earnings.
The British lender unveiled a 3 pence per share payout and said it expected to treble the distribution over the full year, in a sign of confidence in its ability to improve returns from its consumer and corporate lending businesses.
“We are accumulating capital at a very strong rate and we feel good about that,” Chief Executive Jes Staley said, adding that a 9 pence full-year dividend would be the highest payout to Barclays shareholders since 2008.
The robust investment banking performance, however, was marred by lower than expected half-year profits in UK retail and business lending, which were down 11% on the previous year, excluding one-off costs.
Analysts also said Barclays was compensating for weaker income and higher costs by ramping up the dividend payments.
Barclays blamed the income fall on squeezed margins resulting from intense competition in Britain’s mortgage market and decisions to take less risk in its credit card business.
The UK unit’s net interest margin – a measure of underlying profitability – fell to 3.11% from 3.24% the previous year, while its return on tangible equity dropped to 15.1% from 17.3%.
Group pretax profit dropped to 1.58 billion pounds, in line with forecasts, from 1.9 billion a year ago.
Barclays shares rose 2.5% against a 1.5% gain in the FTSE 350 banks index FTNMX8350.
Barclays’ transatlantic lending strategy has been overshadowed since early 2018 by a debate about the performance of its investment bank sparked by activist investor Edward Bramson.
Bramson’s bid to gain a board seat was defeated in a May shareholder vote but the New York-based financier, who controls a 5.5% stake, has said he will continue to agitate for cuts to the lender’s trading unit.
Staley has instead doubled down on Barclays’ investment banking strategy, including a fresh push into securitisation and a gradual revival of its mothballed Asian advisory business.
Barclays also said it expected full-year costs to come in at less than 13.6 billion pounds, below the minimum threshold it previously said it was targeting for 2019.
It has cut around 3,000 roles in the second quarter and said the positive financial impact of the cuts would be felt in its fiscal second half.
Barclays’ results follow another tough quarter for its Wall Street rivals, which earlier this month reported falling trading revenues as investors spooked by geopolitical tensions pared activities and steered clear of fresh bets.
The bank reported a 25% rise in second-quarter income in its fixed income, currencies and commodity trading division, largely thanks to a 166 million pound gain related to the listing of TradeWeb (TW.O) .
Income from its equities business fell 14% and banking advisory fees were down 1%, reflecting cuts in the industry’s fee pool, the bank said.
Reporting by Lawrence White and Iain Withers; Editing by Sinead Cruise and David Holmes