Barclays posts higher third-quarter profit on strong bond trading revenue

Barclays posts higher third-quarter profit on strong bond trading revenue

A sign hangs above an entrance to a branch of Barclays Plc bank in the City of London, UK

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LONDON – Barclays on Wednesday reported an unexpected increase in third-quarter earnings on the back of strong trading revenue, despite the continued slowdown from a costly U.S. trading error.

The British lender posted net profit attributable to shareholders of £1.512 billion ($1.73 billion), beating analysts’ consensus expectation of £1.152 billion and marking an increase from £1.374 billion retired for the same period last year.

“We delivered another quarter of strong returns and delivered revenue growth in each of our three businesses, with a 17% increase in group revenue to £6.4bn,” Barclays CEO said. CS Venkatakrishnan, in a statement.

“Our performance in FICC (fixed income, currencies and commodities trading) was particularly strong and we continued to build momentum in our UK and US consumer businesses”

The group continued to be hit by an overissue of securities in the US, which has resulted in £996m of litigation and conduct charges so far this year.

The biggest contributor to the bank’s upside performance came from its FICC (fixed income, currencies and commodities) trading operations, where revenue soared 93% in the third quarter year-on-year to $1.546 billion. pound sterling.

The bank also benefited from an increase in net interest margin – the difference between what a bank earns in interest on loans and pays on deposits – which rose from 2.53% to 2.78%. as the group reaped the benefits of rising interest rates.

  • The Common Equity Tier 1 (CET1) ratio stood at 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 overissued securities, reached £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 the third quarter of 2021.
  • Credit impairment charges reached £381m, up from £120m last year, with the bank citing a “deteriorating macroeconomic outlook”.

Barclays shares will start Wednesday’s trading session down nearly 20% on the year.

Good results, but caution is required

John Moore, chief investment officer at RBC Brewin Dolphin, said that despite the strong performance, with Barclays benefiting from robust fixed income trading and market volatility, as well as an increase in net income from interests, there is “a caveat in today’s statement and little in the way of news in terms of shareholder return – perhaps in response to the recently mooted prospect of a windfall tax on the banks.”

“Looking forward, the uncertain economic backdrop is likely to put a damper on some of Barclays’ markets, particularly in its credit card and investment banking divisions, with prospects for corporate action – such as capital raises – harder,” Moore said.

“Despite previous mistakes which still plague its results, Barclays remains the best positioned of the UK’s big banks with a more diversified revenue stream – but there are still challenges ahead.”

Sophie Lund-Yates, chief equity analyst at Hargreaves Lansdown, noted that Barclays’ diversified revenue stream makes it more resilient than many peers during economic downturns, but suggested a “gray cloud” of governance issues still loom over the bank.

“The recent overissue of US securities is just the latest blunder and questions have been raised about increased risk due to weak corporate oversight,” she said.

“One thing is certain, Barclays cannot afford another mistake without the questions and concerns becoming a bigger downturn.”

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