Barclays’ profits slip on investment banking weakness

Barclays’s third-quarter profits fell narrowly following a slowdown in its investment banking operation, which offset strength in its credit card arm. 

The banking giant’s pre-tax profits dipped to £1.9billion for the three months ending September, although this was above the £1.7billion anticipated by analysts.

Its total income fell slightly to £6.3billion, due partly to the impact of merging two divisions, as well as weaker dealmaking in its corporate and investment banking arms. 

This offset a resilient performance by its consumer and credit card business, which benefitted from higher balances on US credit card customers.

The firm’s earnings were further dragged down by increasing operating expenses and credit impairment charges resulting from rising interest rates and falling house prices. 

For the opening nine months of 2023, Barclays’ impairment charges were 84 per cent higher than in the same period last year, a factor attributed to delinquencies at its US card business returning to pre-pandemic levels.

Looking ahead, though, the lender has reduced its expected full-year net interest margin to between 3.05 and 3.1 per cent because of the more challenging economic backdrop.

As a result, it is holding off on further share buybacks, having finished a £750million repurchase over the summer.

Following the trading update, Barclays shares slumped 6.75 per cent to 134.3p on Tuesday morning, making them the biggest faller on the FTSE 100 Index.

Matt Britzman, equity analyst at Hargreaves Lansdown, said: ‘Pulling back a bit, Barclays continues to trade at a discount to European peers, largely a result of poor image from a slew of mishaps and a lack of faith that recent returns are sustainable.’

However, he added that the view had ‘perhaps been a little overdone. Return on tangible equity is starting to consistently surpass the key 10 per cent level, the structural hedge should be a healthy income tailwind, and while the investment banking arena continues to look dicey, green shoots are emerging.’