Barclays have released a very respectable set of 3rd quarter earnings this morning and enjoyed attributable profit for the period that beat analysts estimates despite a rise in ‘litigation and conduct’ costs.
Barclays attributable profit rose 10% to £1.5bn in the three months to 30th September, up from £1.37bn in the same period last year. Barclays profit would have been higher if it were not for litigation costs relating to the over issuance of US securities.
“We delivered another quarter of strong returns, and achieved income growth in each of our three businesses, with a 17% increase in Group income to £6.4bn. Our performance in FICC was particularly strong and we continued to build momentum in our consumer businesses in the UK and US,” said C. S. Venkatakrishnan, Barclays Group Chief Executive.
Strong bond trading helped Barclays offset weakness in investment banking activities as higher levels of client activity boosted revenue.
Higher interest rates saw net interest margins rise to 2.78% and net interest income increased 10% to £4.3bn.
However, higher net interest margins are largely priced in after a protracted hiking cycle and investors are keen for insight into banks’ cost management, provisions and outlook.
Barclays outlook
Just as HSBC warned yesterday, Barclays said the economic environment was set to deteriorate and set aside £0.4bn for credit impairments.
However, Barclays were upbeat on their ongoing revenue generation capabilities and saw return on tangible equity in excess of 10%, despite economic challenges.
“Barclays has a lot of strings to its bow, making it more resilient in times of economic difficulty because it’s not reliant on one income stream. However, that’s not to say the group’s immune from hardship,” said Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown.
“Consumer activity in the UK fell in the third quarter, impacting income. Despite there being higher card transaction-based revenues because of improved spending, borrowers are paying down their debt and taking on reduced loans as the economy weakens. That reduces the group’s ability to earn interest, although higher interest rates have helped net interest margins improve, resulting in a resilient showing overall.”
Barclays shares were 1% lower at 148p at the time of writing.