© Stocksak. FILE PHOTO – A branch of Barclays Bank can be seen in London, Britain on February 23, 2022. REUTERS/Peter Nicholls
By Lawrence White & Iain Withers
LONDON (Stocksak). -Barclays beat expectations with a slight rise in third quarter profit on Wednesday. This was due to a strong performance at fixed income trading which helped reduce loan loss charges and helped the company recover from a costly trading error.
The profit before tax of the British bank was 2 billion pounds ($2.3billion) in July-September. This is up from 1.9billion pounds in the same period last year and higher than the average forecast of 1.8billion pounds by analysts.
The income in the fixed income, currencies, and commodities business (FICC), doubled to 1.6 Billion Pounds from a year ago. This was due to heavy trading by clients in volatile markets.
That was a great idea! Barclays (LON:), to increase profits, in contrast with Wall Street rivals who earlier this month reported a decline as they set aside more rainy day funds to cover losses from borrowers.
Barclays’ FICC income growth was more favorable than that of U.S. peers, such as Morgan Stanley (NYSE:), which saw similar business revenues rise 33% over the same period.
European rival Deutsche Bank Fixed income trading revenues grew 38% at ETR.
Barclays’ recent performance was marred by a trading blunder. It agreed to a $361m penalty with U.S. regulators. The bank was penalized for what they called “staggering failures” that led the bank and its affiliates to sell nearly $18 trillion worth of investment products.
The bank’s error cost it hundreds of millions of pounds, but the bank did not take an additional hit in the third-quarter. Instead, it booked a 29 million pound gain, after benefitting from a hedge against its losses.
Barclays stated that the net loss from the error in the year to date was 600,000,000 pounds.
The bank’s results were announced amid the most turbulent period for Britain’s economy and politics since 2016’s Brexit referendum. Rishi Sunak was elected prime minister on Tuesday, following the implosion Liz Truss’s administration.
Truss’s plan of unfunded tax reductions to fuel growth led to a crisis of investor trust that caused a spike in mortgage prices and added pressure on borrowers.
This was on top of an already dire cost of living crisis for customers. It has sparked fears that banks, which have been able to take advantage of higher interest rates, will be subject to greater loan losses due to squeezed household finances.
Barclays set aside 381 million pounds in the quarter to cover potentially soured loans – topping up its provisions for the year to 722 million – to reflect the deteriorating outlook.
($1 = 0.8731 pounds)