Barclays on Thursday, October 24, released information on the results of its operations in the third quarter of the current year.
The net profit of the mentioned financial institution based in the United Kingdom for July-September 2024 was fixed at 1.6 billion pounds ($2 billion). The corresponding indicator showed an increase of 23% year-on-year. It is also worth clarifying that in this case net profit attributable to shareholders is meant. The preliminary forecast of LSEG, based on analyst expectations, provided that the mentioned figure for the third quarter of 2024 would be fixed at 1.17 billion pounds.
The revenue of the financial institution for July-September of the current year amounted to 6.5 billion pounds. For the same period in 2023, this figure was fixed at 6.3 billion pounds. It is worth noting that the preliminary forecast of LSEG provided that the revenue of the financial institution for the third quarter of the current year would be 6.39 billion pounds.
On Thursday morning, the bank’s shares showed an increase of 4.3%. It is also worth noting separately that the corresponding indicator has reached the mark, which is the highest since October 2015.
The lender’s return on tangible equity in the third quarter of the current year was 12.3%. It is worth noting that in the previous quarter, this indicator was fixed at 9.9%.
The CET1 ratio, a measure of solvency of the bank, rose from 13.6% to 13,8% in the third quarter of 2024.
This year, the lender announced an overhaul strategy which is aimed at cutting costs, increasing return for shareholders, and stabilizing long-term financial performance. As part of an appropriate approach, Barclays has been focusing more on domestic lending while reducing costs in its more volatile investment banking unit. The mentioned strategy, among other things, provided for the acquisition of the UK retail banking business Tesco Bank.
In the second quarter of 2024, the net profit of a financial institution showed a moderate decrease compared to the indicator for the same period in 2023. The corresponding result was related to the downward dynamic of income at Barclays’ UK consumer and corporate banks. At the same time, the investment bank’s net profit showed an increase of 10%.
In the third quarter, the bank’s downward performance indicators transformed into upward ones. In July-September 2024, the income of domestic banks increased by 4%.
The financial institution also raised its annual forecast for net interest income from retail in the United Kingdom. The bank expects that the corresponding indicator will reach 6.5 billion. It is worth noting that the previous version of the forecast for net interest income from retail in the United Kingdom provided that this figure would amount to 6.3 billion pounds.
The income of the corporate bank increased by 1% in the fourth quarter of 2024. The corresponding result is based on a growth in average deposit balances. The income of investment banking showed an increase of 6% in the last quarter.
Income at Barclays’ private US consumer bank for July-September of the current year fell 2% compared to the result for the same period in 2023. The same indicator of its wealth management unit fell 3%.
Barclays chief executive officer C. S. Venkatakrishnan on Thursday, during a conversation with media representatives, said that the results for the third quarter of 2024 indicate that the financial institution is currently on track to achieve the targets set in February. In this context, he also separately noted that the lender is guiding upward in its net interest income, and has had two continuous quarters of NII expansion in its business in the United Kingdom. According to him, the process of guiding up for the UK business and financial institutions in general is currently underway. He also stated that the bank sees that costs are very much under control.
Currently, the financial institution expects that the net interest income of the entire group for 2024 will be fixed at above 11 billion pounds. It is worth noting that the previous forecast for the dynamic of the corresponding indicator envisaged the figure at 11 billion pounds. In this case, the bank perceives the prospects of the foreseeable future within the framework of a more optimistic assessment of the most likely figures of its activities.
Citi analysts described the information released on Thursday on Barclays’ performance in the third quarter of 2024 as a good set of results. They also separately noted the special positive nature of the mentioned information in the context that it is regarding domestic business. The mentioned analysts, in a note published on Thursday, said they see high single-digit upgrades to 2024 consensus earnings per share post these strong three-quarter results and see low-single-digit upgrades to 2025+ consensus EPS, mainly on the stronger UK net interest income.
In the year, the value of Barclays shares has increased by 55%. It is also worth noting that in 2023, the corresponding indicator was on a downward trajectory.
This month, Taylor Wright and Cathal Deasy, who lead Barclays’ advisory and underwriting businesses, stated their intention to increase the lender’s share of the investment banking market to about 4%. The corresponding indicator was typical for a financial institution five years ago.
Recently, several banks have announced plans for restructuring, streamlining operations, and cutting costs. The relevant intentions of financial institutions are largely related to the fact that lenders are facing a potential weakening of net interest margins due to lower interest rates as part of the start of monetary easing by central banks in different regions of the world, including the European Union, the United Kingdom, and the United States. This week, HSBC, headquartered in London, announced its intention to consolidate its operations into four business units.
C. S. Venkatakrishnan, commenting on the current interest rates, stated that the financial institution he heads has a very disciplined approach to managing the cost of borrowing. Also, in this context, it was noted that the lender has got a thing called the structural hedge, which is a way of smoothing out the effects of interest rates on its income, and that is part of what is causing its net interest income expansion over the last couple of quarters. According to him, the bank is pretty well protected from changes in the cost of borrowing in the near term.
Barclays currently predicts that by the end of the current year, the Bank of England will cut the policy rate to 4.5% in 2024. It is worth noting that the lender’s previous expectations stipulated that the mentioned indicator would be lowered to 4% by the end of the current year.
Will Howlett, financials analyst at Quilter Cheviot, said that despite past disappointments, the Barclays strategy update has positively shifted the investment narrative for the financial institution. It was also noted that the lender has set clear targets for all units and has focused on areas with higher profitability.
Interactive Investor analyst Richard Hunter said the data released by Barclays on Thursday is positive in many ways. The expert also noted that the warm share price reaction to the update is well-won given the high expectations that the lender was up against going into the results.
Currently, banks are publishing reports on their earnings for the third quarter of 2024. Last Wednesday, October 23, the relevant information was published by Deutsche Bank. This financial institution recorded a net profit, which turned out to be higher than preliminary expectations regarding the dynamic of the appropriate indicator. The corresponding result is related to the revenue growth of the investment bank and asset management units of the lender.
Barclays is one of the largest financial institutions in the United Kingdom and the world. Since 2011, this lender has been one of the systemically important banks. Also, in the mentioned year Barclays was the most powerful transnational corporation in terms of ownership and thus corporate control over global financial stability and market competition.
