Barclays’ profit more than doubled in the third quarter driven by another strong performance from its investment bank, while the impact of coronavirus on its consumer divisions continued to recede.
Net income jumped to £1.45bn from £611m in the same period last year, Barclays said on Thursday, beating analysts’ expectations of £1.1bn. Revenue rose 5 per cent to £5.47bn, compared with the £5.2bn estimate.
While flattered by a big drop in new loan-loss provisions — which fell to £120m compared with £608m last year during a worse phase of the pandemic — the investment bank was again responsible for most of the outperformance as it benefited from a dealmaking boom.
Pre-tax profits at the unit rose 51 per cent to £1.5bn. Fees from capital markets and M&A surged 59 per cent to £971m, comparable to the big gains posted by Wall Street rivals last week.
“We now have a position as one of the top six global investment banks and we’re going to keep that,” said chief executive Jes Staley, referring to Barclays vaulting Credit Suisse in industry rankings. Its Swiss rival is reeling after a succession of scandals caused billions in losses.
Citigroup analyst Andrew Coombs said: “Overall a good set of numbers, albeit driven by a record quarter for investment banking advisory revenues, so the beat may not be fully extrapolated into future quarters.”
The results are further vindication of Staley’s steadfast support of the investment bank, which he has long argued is vital to counterbalance its core British retail business that suffers more during economic downturns.
Earlier this year, activist investor Edward Bramson was forced to admit defeat in his three-year campaign to unseat the chief executive and force the lender to shrink the division.
However, despite Staley’s thesis largely playing out, investors remain sceptical of the long-term viability of unpredictable investment banking earnings. The shares fell 1 per cent after the release on Thursday. The stock has declined 15 per cent since he took over in December 2015.
Capital markets are “growing at a substantial clip, that is not going to go in reverse”, Staley said in response. “There will be volatility [in earnings], but . . . I think we have a good chance to sustain the profitability that we’ve got.”
Markets revenues were less buoyant. Equity trading increased 10 per cent but there was a 20 per cent plunge in fixed-income trading as market volatility returned to normal following the chaos of mid-2020.
On the consumer side of the British lender, there was evidence of a strong economic recovery. Barclays upgraded its forecast for UK GDP growth to 7 per cent this year, the fastest expansion since 1948. It also flagged the potential for interest rate rises sooner than expected.
Pre-tax profits from UK retail banking rose to £451m from £196m due to a combination of lower impairment charges and higher fees from rebounding customer activity.
Staley cited “strong mortgage demand” in the UK that resulted in a £2.3bn increase in home loans and income from its global payments business rising 17 per cent.
The chief executive also addressed fears about rising prices and global supply chain issues.
“A degree of inflation will be welcomed,” Staley said. If it is kept at “2 to 4 per cent, and so long as it is driven by economic growth, that could be a positive. If modest, we don’t see it creating credit problems.”
He added that current shortages of goods and transport were largely down to a sharp increase in activity after much capacity was left dormant in 2020.
“The disruptions are there, but are not holding back growth at 7 per cent and the long-term impact will be quite modest,” he said. “Business is clearly already reacting.”
Finally, Barclays also warned that the lender was planning “structural cost actions before the end of the year”, particularly in its domestic market. It declined to provide more details on branch and office closures or job cuts.
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2021-10-21 07:09:11Z
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