Barclays profits drop as trading and dealmaking slow

Barclays’ profits fell 16 per cent in the third quarter as revenue growth slowed at the lender’s UK retail division and declined at the investment bank, which continues to suffer from a dearth of M&A deals and lower trading activity.

Net profit fell to £1.3 billion (€1.5 billion) from £1.5 billion in the same period last year, beating analysts’ average estimate of £1.1 billion, the British lender said on Tuesday. Overall group revenue increased 5 per cent to £6.3 billion, matching City expectations. The bank also took fewer provisions for bad loans than analysts had forecast and no litigation or misconduct charges.

Chief executive CS Venkatakrishnan said the results came “against a mixed market backdrop” and promised an investor update with new financial targets alongside its full-year earnings in February.

“We see further opportunities to enhance returns for shareholders through cost efficiencies and disciplined capital allocation across the group,” he said.

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Attributable profit fell 3 per cent at Barclays’ UK retail lender, as the benefits from the higher interest rate environment started to wane and customers moved their deposits into higher returning products.

Barclays warned that its net interest margin (NIM) — the difference between the interest received on loans and the rate paid for deposits — is now expected to be in the range of 3.05 per cent to 3.10 per cent in 2023, down from previous guidance of 3.2 per cent to 3.15 per cent.

The measure will be closely watched as its domestic peers, including NatWest and Lloyds Banking Group, prepare to report their own quarterly results over the next week.

It was a mixed quarter at the investment bank, where income fell 6 per cent to £3.1 billion when the impact of a bond overissuance error last year was stripped out. Fixed-income trading income fell sharply by 26 per cent, but equity trading revenue more than doubled. Advisory and capital markets fees also dropped 30 per cent because of fewer takeover deals and lower debt issuance.

The decline matches the tough trend seen on Wall Street earlier in the month, where advisory fees were broadly flat or down, reflecting an 18-month slump in dealmaking amid rising rates and geopolitical uncertainty.

The Irish unit of Barclays - known as Barclays Europe - became the British bank’s post-Brexit European Union hub and is the second-largest commercial bank in the State. - Copyright The Financial Times Limited 2023