Barclays' Q3 profits soar to £2.2bn, surpassing expectations with robust investment banking performance

Barclays' third-quarter profits exceeded predictions, thanks to a resurgence in its Wall Street investment banking operations. The FTSE 100 bank posted a pretax profit of £2.2bn for the period between July and September, marking an 18 per cent increase from £1.9bn the previous year.

Analysts had anticipated a third-quarter profit of around £2bn. The earnings boost was largely attributed to Barclays' investment bank, which saw a six per cent year-on-year income growth to £2.9bn, as reported by City AM.

Investment banking income soared by 13 per cent due to higher fees in Barclays' advisory and debt and equity capital markets units. Income from global markets, fixed income and equities all rose by three per cent.

This strong performance mirrored that of rivals such as JP Morgan and Goldman Sachs, who also exceeded earnings estimates for the third quarter. Meanwhile, Barclays' UK bank demonstrated resilience amidst falling interest rates.

Total income for the business increased by four per cent, aided by Barclays setting aside just £16m for bad loans during the quarter a significant decrease from £59m the previous year. Its net interest income (NII) the difference between what it earns from loans and what it pays on deposits was six per cent higher at £1.7bn, aligning with estimates.

Barclays' net interest margin expanded by 30 basis points to 3.34 per cent as the bank navigated fierce competition for mortgages and deposits, spurred by expectations of further rate cuts from the Bank of England.

Barclays has updated its 2024 financial outlook, now anticipating a group net interest income (NII), excluding the investment bank and head office, to exceed £11bn, surpassing the previously projected figure of around £11bn.

The bank's UK division is forecasted to contribute approximately £6.5bn to the full-year NII, an increase from the earlier estimate of about £6.3bn.

In response to the unpredictable revenue and significant capital demands of its flagship investment bank, Barclays is taking steps to downsize this segment in favour of more consistently profitable areas within the group.

At the same time, the banking giant is ramping up investments across its UK operations, corporate banking, and wealth and asset management sectors, as part of a strategic three-year transformation plan that was announced in February.

This comprehensive revamp, steered by Chief Executive CS "Venkat" Venkatakrishnan, aims to slash costs by £2bn and deliver £10bn back to shareholders by 2026.

Barclays reported stable operating expenses at £4bn for the third quarter, noting that its cost-saving measures of roughly £300m have successfully counterbalanced inflationary pressures.

"We continue to be focused on disciplined execution of our three-year plan and are encouraged with progress to date," Venkat remarked on Thursday.

He further noted that Barclays is well on its way to achieving its goal of a return on tangible equity (RoTE) of over 12 per cent by 2026, a critical profitability benchmark for banks. The bank's RoTE stood at 12.3 per cent in the third quarter.

Barclays' share price has seen a significant increase of 56 per cent this year, positioning it as one of the top performers in the FTSE 100. The company's shares saw a two per cent rise in early trading on Thursday.