Barclays beats trade boom forecast, but bad debt charges rise

  • Pre-tax profit of 2 billion in Q3 against 1.8 billion expected
  • FICC revenue doubles to stg 1.6 billion
  • Charges on bad debts increase

LONDON, October 26 (Reuters) – Barclays (BARC.L) beat expectations with a slight increase in third-quarter earnings on Wednesday, buoyed by a record performance in fixed-income trading, but lending costs and fees rose in a sign of lingering challenges.

The British bank made a pre-tax profit of 2 billion pounds ($2.3 billion) in July-September, against 1.9 billion a year ago and above analysts’ forecasts.

However, a heavy charge for potentially degraded loans – taking its provisions for the year to £722million – highlighted the difficult outlook as a worsening cost of living crisis squeezes borrowers.

Barclays shares opened slightly higher but were last down 1% at 0833 GMT in a broadly flat FTSE index (.FTSE)investors absorbed higher credit losses and adjusted costs 4% higher than expected.

“The main negatives in the numbers are the adjusted cost loss and the increasingly cautious tone on asset quality,” Credit Suisse analysts said.

A trading boom in volatile markets provided a ray of hope, as revenues in the fixed income, currencies and commodities (FICC) sector doubled to £1.6bn from the previous year. previous year, the highest total ever recorded for the third quarter.

This has helped Barclays boost profits, unlike rivals on Wall Street which earlier this month reported more subdued performance.

Barclays’ rising FICC revenue compares favorably to US peers such as Morgan Stanley, which saw revenue from similar businesses increase by 33% over the same period, and JPMorgan which recorded only a gain of 22%.

European rival Deutsche Bank said fixed income trading revenue rose 38%.

Barclays’ performance in FICC, typically its investment bank’s highest-earning business, more than offset a slump in deals that hit merger and advisory fees across the industry.

Barclays advisory fees, including mergers and acquisitions (M&A), fell 45% in the third quarter to £533 million. Global M&A volumes fell to $2.96 trillion as of September 28 this year, from $4.4 trillion in the same period last year. Read more

Analysts said Barclays’ results were somewhat flattered by the decline in the value of the pound against the dollar, as the bank records substantial revenue from its investment banking and consumer businesses in the United States. United and converts them into pounds sterling.

“Today’s statement contains one caveat and little news in terms of shareholder returns – perhaps in response to the recently mooted prospect of a windfall tax on banks,” said John Moore, Chief Investment Officer at RBC Brewin Dolphin.

Banks fear British Prime Minister Rishi Suank’s new government could be tempted to impose more taxes on the industry to help prop up government finances. Read more

COST OF LIVING GROWTH

The bank’s results come amid the most turbulent period in British politics and the economy since the 2016 Brexit referendum, with Sunak coming to power on Tuesday following the implosion of the administration of Liz Truss.

Truss’s program of unfunded tax cuts to fuel growth has sparked a crisis of investor confidence that has sent mortgage prices soaring, increasing pressure on borrowers and raising fears of loan losses.

Despite the higher charge for loan losses – including £381m taken in the quarter – Barclays chief financial officer Anna Cross told reporters it was taken in advance.

“We don’t see any signs of stress on the book, in any of our portfolios,” Cross said, adding that customers were paying off credit card debt at a high rate compared to historical levels.

Barclays’ recent performance has been marred by a trade error that saw it agree to a $361m fine with US regulators for what they described as ‘staggering’ failures that led the bank to oversell nearly $18 billion in investment products.

The mistake cost the bank hundreds of millions of pounds this year, but it suffered no further blow in the third quarter, instead booking a gain of 29 million pounds after being hedged on his losses.

Barclays said the net loss resulting from the error in the year to date was £600 million.

($1 = 0.8731 pounds)

Reporting by Lawrence White and Iain Withers Editing by Mark Potter

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