Barclays narrowly beats earnings forecasts thanks to strong consumer credit card business

LONDON – Barclays on Tuesday reported net profit of 1.27 billion pounds ($1.56 billion) for the third quarter, slightly above expectations as strong results in its consumer and credit card businesses offset weak investment banking revenue.

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.

Other highlights for this quarter are as follows:

• The CET1 ratio, a measure of banks’ financial strength, was 14%, up from 13.8% in the previous quarter.
• The return on tangible equity reached 11%, and the bank aims to achieve more than 10% in 2023.
• The group’s total operating expenses fell by 4% year-on-year to £3.9bn, as inflation, business growth and investments were offset by “efficiency savings and lower litigation and conduct fees”.

Barclays CEO CS 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 shareholder returns through cost efficiencies and disciplined capital allocation across the group.”

He added that Barclays would set out capital allocation priorities and revised financial targets in an update to investors alongside full-year earnings.

Barclays Corporate and Investment Bank (CIB) saw income fall 6% to £3.1bn, as the bank cited lower client activity in global markets and investment banking fees.

This was mostly offset by a 9% increase in revenue from its Consumer, Cards and Payments (CC&P) business to £1.4 billion, reflecting higher balances on US cards and the relocation of its Wealth Management and Investments (WM&I) division from Barclays in the UK.

The bank did not announce any new capital returns to shareholders after announcing a £750m share buyback in July.

Barclays hinted at significant cost cuts to be announced later in the year, noting in its earnings report that the group is “evaluating actions to reduce structural costs to help increase future returns, which could result in material additional charges in the 423rd quarter.”

The cost-to-income ratio in the third quarter was 63%, but the bank set a medium-term target of less than 60%.