Barclays PLC share price up, posts rising profit despite declining revenue, legal issues weigh

Barclays PLC posted earnings today, to reveal mixed results, with a decline in total income and a swing back to profit. Legal matters weighed, however, with the bank setting aside £900 million for compensations.

The British lender made a net profit of £161 million ($272.1 million) for the three months to June 30, compared with a net loss of £168 million last year. Meanwhile, pretax profit rose to £689 million from £142 million last year.

“We are making positive progress against all the key metrics we have identified and we can now see the new Barclays starting to emerge,” CEO Antony Jenkins said. “This is significant progress, and it has been achieved in the face of significant headwinds.

Overall income for the first half of the year dropped 11.86% on an annual basis to £13.6 billion. The banks return on equity (RoE) declined to 6.5%, compared with 7.8% last year, and well below the target of 11%.

The banks results were severely pressured by a £900 million contingent reserve, set aside to compensate customers wrongly sold payment protection insurance. Barclays has now committed almost £5 billion towards the issue.

“The operating environment for our sector remains difficult,” CEO Antony Jenkins said. “In addition, legacy conduct issues continue to impact our performance.”

The bank is facing a number of other legal issues as well, including a LIBOR rigging scandal in the UK and dark pool trading misrepresentation allegations. Barclays said that the US Department of Justice asked to extend the “nonprosecution agreement”, in order to better investigate the bank.

Meanwhile, the New York Fed is pushing to install government monitors within Barclays as part of its investigation, the Wall Street Journal reported.

In a bid to restore reputation and appease regulators, the bank opened a compliance academy recently, to provide its employees with technical and behavioral training.

Several other foreign banks, like Deutsche and Lloyds are also facing legal matters in the US, as authorities crack down on the issue, which led to the financial crisis.

Barclays PLC was up 4.55% to trade at 229.07 pence per share at 13:20 BST today, standing for a market capitalization of £35.97 billion. Shares have dropped almost 15% since a year ago. According to the Financial Times, 28 analysts offering 12 month price targets for Barclays PLC have a median target of 277.50 pence, with a high estimate of 365.00 and a low estimate of 203.22. The median estimate represents a 26.65% increase from the last price of 219.10.