A view of the Canary Wharf financial district of London.
Prisma by Dukas | Universal Images Group | Getty Images
LONDON — Barclays shares retreated on Tuesday as investors assessed the prospect of cost-cutting charges, pressure on domestic interest margins, and weak performance in formerly strong divisions.
The bank reported a net profit of £1.27 billion ($1.56 billion) for the third quarter, slightly exceeding expectations as strong results in its consumer and credit card businesses compensated for weakening investment bank revenues.
Analysts polled by Reuters had a consensus forecast of £1.18 billion, down from £1.33 billion in the second quarter and £1.51 billion for the same period in 2022.
Here are other highlights for the quarter:
- CET1 ratio, a measure of banks’ financial strength, stood at 14%, up from 13.8% in the previous quarter.
- Return on tangible equity (RoTE) was 11%, with the bank targeting upwards of 10% for 2023.
- Group total operating expenses were down 4% year-on-year to £3.9 billion as inflation, business growth, and investments were offset by “efficiency savings and lower litigation and conduct charges.”
Barclays CEO C.S. Venkatakrishnan said the bank “continued to manage credit well, remained disciplined on costs, and maintained a strong capital position” against a “mixed market backdrop.”
“We see further opportunities to enhance returns for shareholders through cost efficiencies and disciplined capital allocation across the Group.”
Barclays will set out its capital allocation priorities and revised financial targets in an investor update alongside its full-year earnings,” he added.
Barclays’ corporate and investment bank (CIB) saw income decrease by 6% to £3.1 billion, with the bank citing reduced client activity in global markets and investment banking fees.
Revenue in the traditionally robust fixed income, currency, and commodities trading division dropped 13% as market volatility moderated, dampening trading volumes.
This was mostly offset by a 9% revenue increase in its consumer, cards, and payments (CC&P) business to £1.4 billion, reflecting higher balances on U.S. cards and a transfer of the wealth management and investments (WM&I) division from Barclays U.K.
The bank did not announce any new returns of capital to shareholders after July’s £750 million share buyback announcement.
Cost cutting charges ahead
Barclays hinted at substantial cost-cutting that will be announced later in the year, mentioning in its earnings report that the group is “evaluating actions to reduce structural costs to help drive future returns, which may result in material additional charges in Q423.”
The cost-income ratio in the third quarter was 63%, but the bank has set a medium-term target of below 60%.
Notably, Barclays cut its net interest margin forecast for the U.K. bank
