Barclays PLC (NYSE:BCS) (LON:BARC) unveiled strong second quarter 2014 results today, posting PBT better than consensus and leading Jefferies and Investec to affirm their Buy rating on the global financial services provider.

Other analysts from Santander and Deutsche Banks have also produced Buy ratings for shares of Barclays PLC (NYSE:BCS) (LON:BARC).

Barclays PLC’ strong PBT

Ian Gordon of Investec in a research note published Wednesday points out Barclays PLC (NYSE:BCS) (LON:BARC)’s PBT is above analyst consensus. Taking a closer look at PBT by division over the past ten quarters, Gordon points out the contribution from investment banking has declined, while impressive and sustained growth has been reported within Personal & Corporate Banking and Barclaycard divisions.

Barclays PBT by division Barclays PLC
Barclays PLC

Analyzing the bank’s group income statement over the past ten quarters, the Investec analyst notes lower income has been offset by absolute reductions in underlying costs and impairments. The following chart summarizes the income statement:

Income statement summary

Delving deeper into Barclays PLC (NYSE:BCS) (LON:BARC)’s reported earnings per share and dividends per share through 2010-2013 in conjunction with the analyst’s forecast through 2014-16e, the Investec analyst believes that the most significant conduct-related costs have now already been considered, and that lower exceptional items, coupled with further reductions in absolute costs, will be the primary drivers of growth in reported EPS.

Barclays' EPS and DPS

The Investec analyst anticipates the growth in EPS will facilitate a resumption of growth in Barclays’ dividend payout.

The analyst notes Barclays PLC (NYSE:BCS) (LON:BARC)’s shares have risen through six consecutive trading sessions ahead of today’s results. However, the analyst points out that the following chart reminds us that Barclays has been an absolute “dog” of an investment in 2014 year-to-date, materially underperforming all other UK banks. Tthe Investec analyst, however, anticipates this trend to reverse in the second half of the year:

UK Banks' relative total shareholder return

Barclays PLC CET CRD IV ratio set to grow

Gordon also points out material progress has already been made in terms of further strengthening the group’s capital position over the past year. The analyst commends such a good performance despite weaker investment banking revenues and some ongoing conduct costs. The following chart captures the bank’s CET CRD IV ratio:

Barclays' CET CRD IV ratio

The Investec analyst anticipates the pace of progress will accelerate through 2015/16e, aided by higher retained earnings and the ratio will go up to 11.9% by December 31, 2016e from the current 9.9% level.

Joseph Dickerson of Jefferies in his Wednesday research note points out Barclays PLC (NYSE:BCS) (LON:BARC)’s Q2 fully loaded CET1 ratio of 9.9% was below the anticipated 10.2%. However, the analyst points out that Barclays’ PRA leverage ratio was 3.4% relative to the estimated 3.1%.

The Jefferies analyst also notes Barclays PLC (NYSE:BCS) (LON:BARC)’s FICC and equity results were better than anticipated. The analyst points out Barclays’ core business trends were strong, largely aided by better impairments in Personal and Corporate banking and resilient IB revenues.