Barclays almost doubled its third-quarter profit to £2bn as it benefited from strong mortgage lending in the UK and a boom in investment banking.
The British bank’s profit before tax in the three months to September rose from £1.1bn a year ago, taking its year-to-date profit to an all-time high of £6.9bn. Barclays said a consumer recovery had contributed to the stronger performance, as well as higher investment banking fees.
Jes Staley, the chief executive, said: “While the corporate and investment bank performance continues to be an area of strength for the group, we are also seeing evidence of a consumer recovery and the early signs of a more favourable rate environment.”
He brushed off concerns over rising inflation and the supply chain crisis, saying the UK economy was on track to grow by 7% this year, its best performance since 1948.
“The recovery from the pandemic has been quite robust,” Staley said, adding that annual inflation running at up to 4% would be manageable. “If it’s driven by economic growth that could be positive. A level of inflation driving a response from the bond market and interest rates moving up would be quite positive for Barclays.”
He was also sanguine about the impact of supply chain shortages, which have left some supermarket shelves in Britain empty. “The supply chain disruptions are there. It’s not holding back an economy that’s going to grow at 7%. Its long-term impact will be quite modest.”
Staley, along with 200 other business leaders, attended a global investment summit held in London this week. “There was a reasonable degree of optimism coming out of that summit,” he said.
Barclays has released bad debt provisions of £622m so far this year as the economy recovers from the pandemic and it reckons it will need less to cover bad debts. This is in stark contrast with this time last year when Barclays had set aside £4.3bn to cover bad debts, but government support measures propped up businesses.
Barclays said it was “well positioned for a rising rate environment”, as expectations mount that inflation pressures will prompt the Bank of England to raise interest rates. Personal banking income in the UK climbed 10% to £2.9bn in the first nine months of the year, reflecting strong growth in mortgages and deposits, and boosted by the end of Covid-related customer support measures.
Tushar Morzaria, the bank’s chief financial officer, said UK banks “will be very focused on reviewing their pricing” on mortgage deals as interest rates go up. But he insisted that mortgage rates were still “extremely low” by historical standards and that the market was “very, very competitive”.
Barclays plans further cost-cutting measures before the end of the year including in the UK, but did not give details on potential branch closures or job cuts.
Barclays’ investment bank had a bumper quarter, similar to its Wall Street rivals which beat profit forecasts last week. Investment banking fees and equity trading income posted their best nine-month performances on record. This resulted in a return on equity for the overall investment bank of 16.4%, up from 10.5% in the same period last year.
Zoe Gillespie, investment manager at Brewin Dolphin, said: “A record profit for Barclays in the third quarter is illustrative of the turnaround in fortunes the UK’s major banks have had compared to where they were this time last year. Barclays has delivered a strong set of numbers and is striking a good balance between reinvesting in its businesses and delivering returns to shareholders.”