Barclays Q3 profit boosted by investment banking fees

By Raffaele Redi

Barclays posted strong Q3 results, with profit almost doubling to £2bn

 Barclays bank sign and logo in Lincoln                                 
Barclays saw positive trends in UK and US consumer spending and payments volumes following the easing of lockdown restrictions – Photo: Shutterstock.
                                

Barclays has posted strong third-quarter (Q3) results, with profit almost doubling to £2bn ($2.8bn), boosted by investment banking fees, equities income and a consumer recovery, with strong UK mortgage and deposit volumes.

However, the lender – which left dividends untouched but hinted at raising its annual payout, now at 2p – is trading 0.6% lower, at £197.18, as of 11:30 BST (UTC +1).

The FTSE 100 bank posted a pre-tax profit of £1.96bn ($2.71bn), compared with £1.15bn for the same period in the previous year, above expectations of £1.60bn, according to the lender’s compiled consensus.

“Barclays continues to experience strong UK mortgage and deposit volumes. Although yet to translate into meaningful unsecured balance growth, positive trends in UK and US consumer spending and payments volumes have been observed following the easing of lockdown restrictions,” said the UK lender.

Record group profit

The group’s diversified business model delivered a record profit before tax of £6.9bn, while Q3 2020 year-to-date (YTD) stood at £2.4bn. Barclays also saw a return on tangible equity (RoTE) of 14.9%, compared to 2020’s RoTE of 3.6%, and earnings per share (EPS) of 30.8p, compared to last year’s 7.6p. Excluding structural cost actions and performance costs, the group’s total operating expenses were flat.

The UK lender benefitted from strong corporate and investment bank (CIB) performance, with income from investment banking fees and equities witnessing its best Q3 YTD on a comparable basis, driving the CIB RoTE to 16.4%, compared to 10.5% in the previous period last year.

“On top of a good first half, a strong third-quarter performance means Barclays has delivered its highest Q3 YTD pre-tax profit on record in 2021, demonstrating the benefits of our diversified business model. We continue to support our customers and clients through the Covid-19 pandemic, have achieved a double-digit RoTE in every quarter year to date, and expect to deliver a full-year RoTE above 10%,” said James E Staley, chief executive officer.

“While the CIB performance continues to be an area of strength for the group, we are also seeing evidence of a consumer recovery and the early signs of a more favourable rate environment. Against that backdrop, we are focused on balancing cost efficiencies with further investment into high-returning growth opportunities,” he added.

Raising payout?

Staley hinted at the idea of increasing dividends after strong capital figures, with a common equity tier 1 (CET1) ratio of 15.4%, above the target range of 13% to 14%.

“Our CET1 ratio of 15.4% means we are also in a strong position to balance growth with a key priority of returning excess capital to shareholders,” he said.

The UK bank said it is reinvesting its efficiency savings to boost income growth. It witnessed a net credit impairment release of £0.6bn for Q3 2021 YTD, driven by an improved macroeconomic outlook and benign credit performance.

As for the outlook, Barclays expects the impairment run rate to remain below historical levels in coming quarters, while it forecasts to deliver a RoTE above 10%. Excluding structural cost actions and performance costs, the full-year 2021 costs are expected to be around £12bn. The group said it is evaluating planned structural cost actions for Q4 2021.

Finally, the CET1 ratio is expected to remain above the target range of 13% to 14% at 31 December 2021, while the lender intends to maintain a progressive ordinary dividend policy and additional cash returns, including share buybacks.

Further reading: Goldman Sachs smashes Q3 expectations

The material provided on this website is for information purposes only and should not be regarded as investment research or investment advice. Any opinion that may be provided on this page is a subjective point of view of the author and does not constitute a recommendation by Currency Com or its partners. We do not make any endorsements or warranty on the accuracy or completeness of the information that is provided on this page. By relying on the information on this page, you acknowledge that you are acting knowingly and independently and that you accept all the risks involved.
iPhone Image
Trade the world’s top tokenised stocks, indices, commodities and currencies with the help of crypto or fiat
iMac Image
Trade the world’s top tokenised stocks, indices, commodities and currencies with the help of crypto or fiat
iMac Image