Barclays’ profits slip on investment banking weakness
- Barclays reported pre-tax profits of £1.9 billion for the quarter ending September
- Total revenues fell to £6.3 billion, partly due to the impact of the merger of two divisions
- The company’s profits were further depressed by rising operating costs
Barclays’ third-quarter profits fell narrowly due to a slowdown in its investment banking business, which offset the strength of its credit card business.
The banking giant’s pre-tax profit fell to £1.9 billion for the three months ended September, although this was higher than the £1.7 billion expected by analysts.
Total revenues fell slightly to £6.3 billion, partly due to the impact of the merger of two divisions and weaker dealmaking in the corporate and investment banking divisions.
Forecast: The banking giant revealed that pre-tax profits fell to £1.9 billion for the three months ending September, although this was higher than the £1.7 billion expected by analysts.
This offset the resilient performance of the consumer and credit card businesses, which benefited from higher balances on US credit card customers.
The company’s profits were further dented by rising operating costs and credit losses due to rising interest rates and falling home prices.
For the first nine months of 2023, Barclays’ impairment charges were 84 percent higher than the same period last year, a factor attributed to delinquencies at its US cards business returning to pre-pandemic levels.
Looking ahead, however, the lender has reduced its full-year forecast net interest margin to between 3.05 and 3.1 percent due to tougher economic conditions.
As a result, the company is holding off on further share buybacks, having completed a £750 million buyback in the summer.
After the trading update Barclays shares fell 6.75 per cent to 134.3p on Tuesday morning, making them the biggest fallers on the FTSE 100 Index.
Matt Britzman, equity analyst at Hargreaves Lansdown, said: ‘Barclays is pulling back slightly and continues to trade at a discount to its European peers, largely due to a poor image following a string of accidents and a lack of confidence that the recent returns are sustainable. ‘
However, he added that the position “may have been a bit exaggerated.
‘Tangible equity returns are starting to consistently exceed the key 10 percent level, structural hedging should have a healthy income tailwind, and while the investment banking arena still looks dicey, green shoots are emerging. ‘
Barclays’ results follow a mixed earnings season at the biggest US banks, with Morgan Stanley hit by a huge drop in dealmaking revenue, while other banking giants showed muted growth or decline.
Investment banking deals have fallen significantly over the past 18 months, but there have been notable signs of recovery recently, such as the $54 billion listing of smartphone chip designer ARM Holdings on the Nasdaq.
Barclays’ trading update also comes a fortnight after former CEO Jes Staley was barred from holding a senior position in the City for misleading regulators about his relationship with convicted pedophile Jeffrey Epstein.
The Financial Conduct Authority said Staley had “recklessly” approved a letter from Barclays to the city watchdog saying his last contact with Epstein had taken place “well before” he became CEO.
A prominent group of shareholders recently called on the bank’s chairman, Nigel Higgins, to quit over concerns that the board he has led for the past four years has taken Staley’s guarantees to the letter.