Barclays surprises as profit lifts 35%
BARCLAYS said profit rose 35 percent in the third quarter as revenue from fixed-income trading surged to the highest in more than two years.
Pretax profit climbed to £837 million (R14.09 billion) from £619m a year earlier, the London-based lender said yesterday. Excluding one-time items, profit was £1.7bn, beating the £1.53bn average estimate of five analysts surveyed.
The results may help chief executive Jes Staley convince investors of the advantage of keeping an investment bank, even after it posted lower returns than the lender’s other businesses in recent years. Staley has said calls to spin off the unit were “shortsighted” because it served as a counterweight to the retail divisions, which analysts forecast will be hit by a slowdown in the UK economy after the Brexit vote.
“Barclays’s results are significantly better than expected at the headline level, driven by strong performances by the investment bank division and in non-core,” Raul Sinha, an analyst at JPMorgan Chase, said.
Damping investor sentiment was the bank’s common equity Tier 1 ratio, a measure of its capital strength, which remained static at 11.6 percent. This was largely because the bank’s pension plan swung to a £1.1bn deficit from a £800m surplus, trimming 0.3 percentage points from the key capital ratio. The bank also took a further £600m provision to compensate customers for improperly sold payment-protection insurance.
Staley also confirmed the bank was “in discussions” with the US Department of Justice regarding an investigation into its sale of mortgage securities, but declined to give a time scale for any settlement for the scandal. If the probe, which alleges the bank packaged and sold toxic subprime mortgage bonds that fuelled the 2008 financial crisis, results in a substantial fine, Barclays’s capital level would be further reduced.
Barclays swung between gains and losses and traded 1.4 percent higher at 184.3 pence at 10.23am in London yesterday. Still, the stock has fallen about 16 percent this year, even after a rally of more than 40 percent from its trough four days after the June 23 Brexit vote. After a two-year slump, the bank trades at about half its book value.
Fixed-income revenue climbed 40 percent from a year earlier to £947m. Analysts had expected £876m in revenue from the business. – Bloomberg