Barclays exceeded market forecasts by tripling third-quarter earnings, as it joined Wall Street competitors in collecting bountiful investment banking fees from a spike in advising mandates and stocks trading.
The British bank generated a profit before tax of 2 billion pounds ($2.8 billion) in the July-September quarter, beating analyst expectations of 1.6 billion pounds and more than double the 1.1 billion pounds it made a year ago.
The excellent performance demonstrated the significance of Barclays' U.S. business, which accounts for roughly half of its revenue, as well as the resilience of British banks' balance sheets in the face of the epidemic, with the rest of the industry reporting in the coming two weeks.
According to Barclays, its advising and equities division experienced a record first nine months of the year, resulting in a return on equity of 16.4 percent for the total investment bank, up from 10.5 percent a year before.
"While CIB (investment bank) performance remains a strength for the company, we are also seeing evidence of a consumer rebound and the early indicators of a more favorable rate environment," said Barclays CEO Jes Staley.
Staley told reporters that the bank was largely unconcerned about the potential of rising inflation in the United Kingdom, adding that annual price increases of up to 4% might be beneficial to the bank as long as economic growth remained strong.
In contrast, many other major corporations reported profits on Thursday, including consumer goods behemoth Unilever, which warned that rising inflation will force them to raise prices.
After government support measures buoyed up firms, Barclays released 622 million pounds in funds set aside for bad debt charges that have yet to materialize, boosting the bank's earnings.
"The reversal in fortunes of the UK's main banks compared to where they were this time last year is symptomatic of the record profit for Barclays in the third quarter," said Zoe Gillespie, investment manager at Brewin Dolphin.
Despite a tumultuous year for the British economy, with supply chain problems and gasoline shortages that erupted in September denting consumer and company confidence, the provision announcement comes as a welcome relief.
Despite this, Barclays raised its economic predictions for the UK from the previous quarter, predicting that the country's GDP will reach pre-pandemic levels by early 2022.
However, the bank cautioned that uncertainty remained high, with a large number of employment in its core UK and US markets at danger of being cut when government assistance measures were eliminated. As a consequence of more clients banking online since the epidemic, Barclays has suggested that it may close additional branches in the UK.
Finance Head Tushar Morzaria stated, "We'll offer more detail once we've finalized those plans... the only thing I'll say is it's a march towards making your business more and more digital."
In the core investment banking areas of advising, equities, and fixed income, Barclays is the only British bank fighting with Wall Street rivals on their own soil these days.
This allowed it to profit from a rise in M&A fees, which helped U.S. peers including Goldman Sachs (GS.N) and Morgan Stanley (MS.N) beat third-quarter profits forecasts as worldwide merger volumes smashed all-time highs.
Barclays said that investment banking income from deal advice increased to 971 million pounds in the third quarter, up from 610 million a year ago, while equities income increased 10%.
However, profits from the bank's fixed income, currencies, and commodities (FICC) segment fell to 803 million pounds from 1 billion pounds a year before.
Decreased global interest rates reduced spreads on fixed income products, resulting in lower customer demand than in the same period last year, according to the lender.
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