Edward Hardy

Barclays Plc (BCS) shares traded at the top of the London market Thursday after Britain's second-biggest bank posted weaker-than-expected full year earnings but said it would increase investor returns this year as it faces increasing pressure from activists to boost its bottom line.

Barclays said profits attributable to shareholders for the 2018 year was pegged at £3.5 billion ($4.57 billion), essentially flat when compared to 2017 thanks in part of a litigation changes of £2.2 billion, including a £1.2 billion settlement with the U.S. Department of Justice linked to mortgage bond sales at the peak of the global financial crisis. 

However, a surprise boost in profits from its investment bank, which rose 15% to £2.6 billion, helped the bank more than double its fourth quarter dividend to 6.5 pence per share, with CEO Jess Staley vowing to "return a greater proportion of those earnings to shareholders by way of dividends and to supplement those dividends with additional returns, including share buybacks". 

"In the course of the year, having resolved major legacy issues and reduced the drag from low returning businesses, we started to see the earnings potential of the bank, as the strategy we have implemented began to deliver," Staley said. "Going forward the principal calls on future earnings should now be returns to shareholders and investing to grow the business."

Barclays shares were marked 3.7% higher in the opening minutes of trading in London and changing hands at 166.8 pence each,  a move that extends their year-to-date gain to around 11.2% and values the London-based lender at around £28.8 billion.

The share prices gains, alongside the stronger-than-expected investment banking profits, may give Staley some support against mounting pressure from activist investor Edward Bramson, whose Sherborne Investors group is seeking significant strategy changes, along with a seat on the board, after building a 5.5% stake in the group when the stock was trading at a 52-week low late last year. 

"It seems clear to us that, in order for the board to protect the long‐term interests of Barclays PLC's shareholders, it will be required to adopt more conservative capital, leverage, and liquidity levels than strictly required by the regulators," Bramson's group wrote to the bank last month. "The most expedient way of meeting this objective is through a judicious reduction in the CIB's assets, which should, we believe, be accomplished before market conditions, now relatively benign, deteriorate."

"The capital that is released should be retained to make Barclays' capital strength undoubted and to protect shareholders over a full cycle," Bramson added.

Staley has consistently argued against Bramson's push for a seat on the board, and the two are expected to continue their dispute heading into the company's annual shareolders meeting in May.