Barclays Q3 profit doubles amid global deal frenzy, beats market expectations

London

BARCLAYS reported a doubling of third quarter profits, beating market expectations, as it followed Wall Street rivals in reaping bumper investment banking fees from a surge in advisory mandates and equities trading.

The British bank on Thursday (Oct 21) reported profit before tax of £2 billion (S$3.7 billion) for the July-September period, better than the £1.6 billion average of analysts' forecasts and twice the £1.1 billion it made in the same period a year ago.

Barclays' advisory and equities business had a record performance in the first nine months of the year, the bank said, driving a return on equity for the overall investment bank of 16.4 per cent compared to 10.5 per cent a year ago.

"While the CIB (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," Barclays CEO Jes Staley said.

The results were boosted by the bank releasing £622 million in cash set aside for bad debt charges that have yet to materialise, after government support measures propped up businesses.

The provision release comes despite a turbulent period for the British economy, with supply chain disruptions and fuel shortages that flared up in September denting consumer and business confidence.

Barclays nonetheless upgraded its economic forecasts for the UK compared to the previous quarter and said it expected the country's GDP to hit pre-pandemic levels by early 2022.

But the bank warned that uncertainty remained relatively high, with a significant number of jobs at risk of redundancy in its key markets of the UK and US as government support measures were withdrawn.

Barclays is alone these days among British banks in competing with Wall Street rivals on their home turf across the main investment banking businesses of advisory, equities and fixed income.

That helped it cash in on the surge in M&A fees that helped US peers such as Goldman Sachs and Morgan Stanley smash earnings estimates for the third quarter, as global merger volumes shattered all-time records.

Barclays reported investment banking income from advising on deals rose to £971 million in the third quarter from £610 million in the same period a year ago, while equities income rose 10 per cent.

The bank's fixed income, currencies and commodities (FICC) division, however, saw income fall from £1 billion in the third quarter a year ago to £803 million this year. REUTERS