LONDON: Barclays on Friday reported stronger than expected third-quarter earnings, as its consumer businesses swung back to profit and bad loan provisions fell, but the bank also warned of a worsening economic outlook.
Barclays is the first major British bank to report third- quarter earnings, with analysts and investors watching closely for signs of the expected wave of bad loans linked to the pandemic.
Barclays reported profit before tax of 1.1 billion pounds ($1.44 billion) for the July-September period, double the 507 million pounds average of analysts’ forecasts.
The bank booked credit impairment and provision charges for the quarter of 608 million pounds, well below the 1 billion pounds analysts had expected.
But Barclays also said it was considering further cost-cutting measures, which could result in fresh charges.
The bank said its consumer, cards and payments business swung back to a profit of 165 million pounds, after a loss in the second quarter, as U.S. credit card spending recovered.
The combined effect of the stronger-than-expected results boosted the bank’s core capital ratio, a key measure of financial strength, to 14.6% against expectations of 14%.
INVESTMENT BANK
Barclays’ performance was supported by its investment bank, repeating a theme of recent quarters and providing a fillip for CEO Jes Staley who has staked much of his credibility on growing this business when some shareholders want to reduce its size.
The markets division, which has benefited from frenzied trading by the bank’s clients amid volatile markets worldwide, increased revenue by 29% year-on-year to 1.69 billion pounds, with equities up 40% to 691 million pounds and fixed income, currencies and commodities up 23% to 1 billion pounds.
The bank, which in common with its peers, has halted dividend payments at the request of Britain’s prudential regulators, said it will update on its payout policy when it reports full-year results.
OUTLOOK DARKENS
Barclays in common with other banks worldwide has set aside billions of dollars worth of provisions against loans expected to go bad as the economic downturn from the COVID-19 pandemic hits borrowers.
U.S. banks which reported earnings earlier this month gave a muddled picture of what to expect, with balance sheets looking superficially healthier than had been expected but executives forecasting a gloomy outlook for loan losses.
Despite its strong third-quarter, Barclays downgraded its baseline economic forecast for the UK this year amid a sweep of local lockdowns to control the spread of COVID-19.
The bank now expects the country’s GDP to fall 10.3% this year, compared to an 8.7% fall forecast in June, but it said there had been no significant rise in bad loans so far due to government financial support for jobs and companies.
HSBC reports earnings on Tuesday, with Standard Chartered and Lloyds Banking Group set to follow on Thursday and NatWest Group on Friday.
($1 = 0.7656 pounds)
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