Barclays earnings Q3 2002

LONDON — Barclays on Wednesday reported an surprising rise in third-quarter earnings on the again of sturdy buying and selling revenues, regardless of a continued drag from a pricey U.S. buying and selling error.

The British lender posted a internet revenue attributable to shareholders of £1.512 billion ($1.73 billion), above consensus analyst expectations of £1.152 billion and marking a rise from a restated £1.374 billion for a similar interval final yr.

“We delivered one other quarter of sturdy returns, and achieved revenue progress in every of our three companies, with a 17% enhance in Group revenue to £6.4 billion,” Barclays CEO C.S. Venkatakrishnan mentioned in a press release.

“Our efficiency in FICC (mounted revenue, currencies and commodities buying and selling) was notably sturdy and we continued to construct momentum in our client companies within the U.Okay. and U.S.”

The group continued to take a success from an over-issuance of securities within the U.S., which have led to £996 million in litigation and conduct prices up to now this yr.

The most important upward contribution to the financial institution’s efficiency got here from its FICC (mounted revenue, currencies and commodities) buying and selling operations, the place revenue soared 93% within the third quarter year-on-year to £1.546 billion.

The financial institution additionally benefited from a rise in internet curiosity margin — the distinction between what a financial institution earns in curiosity on loans and pays on deposits — which rose to 2.78% from 2.53% because the group reaped the advantages from greater rates of interest.

• Widespread fairness tier one capital (CET1) ratio was 13.8%, in comparison with 15.4% on the finish of the third quarter of 2021 and 13.6% within the earlier quarter.
• Group revenue together with the influence from the over-issuance of securities hit £6 billion, up from £5.5 billion for a similar interval final yr.
• Return on tangible fairness (RoTE) was 12.5%, in comparison with 11.4% within the third quarter of 2021.
• Credit score impairment prices rose to £381 million, up from £120 million final yr, with the financial institution citing a “deteriorating macroeconomic outlook.”

Barclays shares will start Wednesday’s buying and selling session down nearly 20% on the yr.

Robust outcomes, however warning abounds

John Moore, senior funding supervisor at RBC Brewin Dolphin, mentioned that regardless of the sturdy efficiency, with Barclays benefiting from sturdy mounted revenue buying and selling and market volatility, together with a lift to internet curiosity revenue, there’s “a warning to right this moment’s assertion and little in the way in which of reports when it comes to returns for shareholders — maybe in response to the just lately mooted prospect of a windfall tax on banks.”

“Trying forward, the unsure financial backdrop will probably put a brake on a few of Barclays markets, notably at its bank cards and funding banking divisions, with the outlook for company motion — comparable to capital raises — tougher,” Moore mentioned.

“Regardless of earlier errors nonetheless plaguing its outcomes, Barclays stays the very best positioned of the key UK banks with a extra diversified revenue stream — however there are nonetheless challenges forward.”

Sophie Lund-Yates, lead fairness analyst at Hargreaves Lansdown, famous that Barclays’ diversified revenue stream makes it extra resilient than many friends during times of financial downturn, however steered {that a} “gray cloud” of governance issues nonetheless hangs over the financial institution.

“The current over-issuance of U.S. securities is simply the most recent blunder and questions have been raised about elevated danger due to weak oversight on the agency,” she mentioned.

“One factor’s for sure, Barclays can’t afford one other slip-up with out questions and issues changing into a extra substantial downturn.”