Banner hanging above the entrance of a branch of Barclays Bank plc in London, UK
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London – Barclays On Wednesday, it reported an unexpected rise in third-quarter earnings on the back of strong trading returns, despite continuing drag from a costly US trading blunder.
The British bank posted a net profit attributable to shareholders of 1.512 billion pounds ($1.73 billion), which was above the consensus analysts’ forecast of 1.152 billion pounds and represented an increase from the restated £1.374 billion for the same period last year.
“We delivered another quarter of strong returns, delivering income growth in each of our three businesses, with a 17% increase in group income to £6.4 billion,” Barclays Chief Executive Officer CS Venkatakrishnan said in a statement.
“Our performance in FICC (Fixed Income, Currency and Commodity Trading) was particularly strong and we continued to build momentum in our UK and US consumer businesses.”
The group has continued to take a hit from over-issuing securities in the US, which has led to £996m in litigation and indictments so far this year.
The biggest upward contribution to the bank’s performance came from its FICC (fixed income, currency and commodity) trading operations, where income rose 93% in the third quarter year-on-year to £1.546 billion.
The bank also benefited from an increase in the net interest margin – the difference between what the bank earns in interest on loans and what it pays on deposits – which rose to 2.78% from 2.53% as the group reaped the benefits from higher interest rates.
- The common equity ratio (CET1) was 13.8%, compared to 15.4% at the end of the third quarter of 2021 and 13.6% in the previous quarter.
- Group income including the impact of over-issuance of securities was £6 billion, compared to £5.5 billion for the same period last year.
- Return on tangible equity (RoTE) was 12.5% compared to 11.4% in Q3 2021.
- Credit impairment charges rose to £381m, compared to £120m last year, with the bank citing “deteriorating macroeconomic prospects”.
Barclays shares will start the trading session on Wednesday down about 20% over the course of the year.
Strong results, but a lot of caution
John Moore, senior investment director at RBC Brewin Dolphin, said that despite the strong performance, with Barclays benefiting from strong fixed income trading and market volatility, along with increased net interest income, there is “a caveat to today’s statement and little in the way of the news in terms of shareholder returns.” – perhaps in response to the recently raised possibility of imposing an unexpected tax on banks.”
Looking ahead, the uncertain economic background is likely to hold back some Barclays markets, particularly in the credit card and investment banking divisions, with expectations of corporate actions – such as raising capital – becoming more difficult to forecast, Moore said.
“Despite the still-boiling past missteps, Barclays remains the best-known British bank with a more diversified income stream – but there are still challenges ahead.”
Sophie Lund Yates, senior equity analyst at Hargreaves Lansdown, noted that Barclays’ diversified income stream makes it more resilient than many of its peers during downturns, but noted that a “gray cloud” of governance concerns still hangs over the bank.
“The over-issuance of US securities is only the latest fatal mistake and questions have been raised about the increased risks due to weak oversight of the company,” she said.
“One thing is for sure, and that is that Barclays cannot afford another slip without questions and concerns that it will become a more fundamental recession.”
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