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Barclays results 3rd quarter 2002

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

Bloomberg | Bloomberg | Getty Images

LONDON — Barclays on Wednesday reported an unexpected rise in third-quarter earnings on the back of strong trading revenue, despite continued drag from a costly US trade error.

The British lender posted a net profit attributable to shareholders of 1[ads1].512 billion pounds ($1.73 billion), above consensus analysts’ expectations of 1.152 billion pounds and marking an increase from a restated 1.374 billion pounds for the same period last year.

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

“Our performance in FICC (Fixes, Foreign Exchange 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 over-issuance of securities in the US, which has led to £996m in litigation and charges so far this year.

The biggest upward contributor to the bank’s results came from its FICC (fixed income, currencies and commodities) trading operations, where revenues rose 93% in the third quarter to £1.546 billion.

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

  • Common Equity Tier 1 (CET1) was 13.8%, compared to 15.4% at the end of the third quarter 2021 and 13.6% in the previous quarter.
  • Group revenue including the impact of over-issuance of securities reached £6 billion, up from £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 rose to £381m, up from £120m last year, with the bank citing a “deteriorating macroeconomic outlook”.

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

Strong results, but caution abounds

John Moore, senior investment manager at RBC Brewin Dolphin, said that despite the strong performance, with Barclays benefiting from robust fixed income trading and market volatility, along with a boost to net interest income, there is “a note of caution to today’s statement and little in the way to news in terms of returns for shareholders – perhaps in response to the recently discussed prospect of a windfall tax on banks.”

“Looking ahead, the uncertain economic backdrop is likely to put a damper on some of Barclays’ markets, particularly its credit card and investment banking divisions, with the outlook for corporate actions – such as capital raising – more difficult,” Moore said.

“Despite past failures which continue to plague results, Barclays remains the best placed of the major UK banks with a more diversified income stream – but challenges remain ahead.”

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, noted that Barclays’ diversified income stream makes it more resilient than many peers during periods of economic downturn, but suggested that a “grey cloud” of governance concerns still hangs over the bank.

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

“One thing is certain, Barclays cannot afford another slide without questions and concerns turning into a more significant downturn.”

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