Barclays earnings Q3 2002

LONDON — Barclays on Wednesday reported an sudden 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 12 months.

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

“Our efficiency in FICC (mounted earnings, currencies and commodities buying and selling) was significantly sturdy and we continued to construct momentum in our shopper 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 expenses to this point this 12 months.

The most important upward contribution to the financial institution’s efficiency got here from its FICC (mounted earnings, currencies and commodities) buying and selling operations, the place earnings 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 larger 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 earnings together with the influence from the over-issuance of securities hit £6 billion, up from £5.5 billion for a similar interval final 12 months.
• Return on tangible fairness (RoTE) was 12.5%, in comparison with 11.4% within the third quarter of 2021.
• Credit score impairment expenses rose to £381 million, up from £120 million final 12 months, with the financial institution citing a “deteriorating macroeconomic outlook.”

Barclays shares will start Wednesday’s buying and selling session down nearly 20% on the 12 months.

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 strong mounted earnings buying and selling and market volatility, together with a lift to internet curiosity earnings, there’s “a warning to in the present day’s assertion and little in the best way of stories by way of 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, significantly at its bank cards and funding banking divisions, with the outlook for company motion — corresponding to capital raises — tougher,” Moore mentioned.

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

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

“The current over-issuance of U.S. securities is barely the newest blunder and questions have been raised about elevated threat 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.”