Barclays reported better-than-expected third-quarter earnings on Thursday after its Wall Street rivals received a significant boost from its investment banking division.
The UK bank reported an attributable profit of £ 1.45 billion for the third quarter. According to Refinitiv data, analysts had 931.25 million
Barclays CEO Jes Staley told CNBC on Thursday that 2021 will be "quite a year" for the bank.
“For many years we have been asked how Barclays is achieving its target return on investment of 10% or better. and I think 2021 will be a pretty strong answer to that question, "he said.
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Barclays' corporate and investment banking division had its strongest year-to-date third-quarter performance in fees and equity income in the third quarter, increasing the bank's return on real capital – a key metric for assessing profitability.
Investment banking fee income rose 37% to £ 2.7 billion, "driven by strong performance in the advisory and equity markets reflecting an increase in the fee pool and market share," the bank said in its earnings release. Equity income rose 28% to £ 2.47 billion due to "strong client activity in derivatives and increased client balances in financing".
The Common Equity Tier 1 capital ratio (CET1) was 15.4%, compared to 14.6% at the end of the third quarter of 2020 and 15.1% in the previous quarter. Net income reached £ 5.5 billion compared to £ 5.2 billion for the same period last year. The return on tangible equity (RoTE) was 14.9% compared to 3.6% in the third quarter of 2020.
Barclays & # 39; Wall Street competitors Goldman Sachs, Wells Fargo, Citigroup, Bank of America, Morgan Stanley and JPMorgan all beat earnings expectations this quarter thanks to the strength of investment banking last week.
The UK lender also released £ 622m from its loan loss provision for the quarter. This compared to a £ 608 million fee posted at the end of the third quarter of 2020.
Although the UK's Covid-19 cases have soared to a seven-day moving average of around 45,000, Staley said Barclays was well positioned to weather further economic headwinds.
"We still have well over £ 6 billion in write-downs on our balance sheet for any future economic problems," he said, adding that the UK's fiscal and monetary response has been "extraordinarily robust".
“The actual loan defaults that we are seeing are at a very, very low level. So if unemployment stays roughly where it is – and government support, I think, has had its effect, the markets are very liquid, the balance sheets are in “very good shape, whether consumers or small businesses – we just see no signs of significant credit deterioration yet, but if there is, we are more than reluctant on our balance sheet. "
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Barclays shares fell around 1% in early Thursday trading. In the year to date, the bank's share has risen by over 35%.
Effects of the rate hike
The Bank of England is widely expected to hike rates by the end of the year, with the potential for two more rate hikes in 2022. Staley said this would have a positive impact on Barclays' future earnings.
“There are six cylinders that power a bank like Barclays: three cylinders lend – the interest we earn on loans we give to businesses, small businesses and consumers. the cash that remains with Barclays, and that was obviously quite slow as interest rates were effectively close to zero, "he said.
“So I think the return to some level of inflation will lead to a rate hike, given the economic recovery we've seen, especially as central banks begin to tone down quantitative easing. I think we will have higher interest rates "and that will actually be pretty positive for Barclays."