Barclays Q3 2023 net profit is down by 16% y-o-y but the bank’s consumer and credit card businesses help to offset weakening investment bank revenues.
Specifically, corporate and investment banking income falls by 6% to £3.1bn. On the other hand, consumer, cards and payments revenue rises by 9% to £1.4bn. This reflects higher balances on US cards. The business unit also benefits from the transfer of Wealth Management & Investments from Barclays UK. Excluding the transfer, Barclays UK income was up 1%. This is driven by net interest income growth from higher rates, including continued structural hedge income. This is partially offset by product dynamics in deposits and mortgages
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Third quarter highlights include a 4% drop in total operating expenses y-o-y to £3.9bn. Ongoing high inflation, business growth and investments were offset by efficiency savings and lower litigation and conduct charges.
But the cost-income ratio for the third quarter rises by 3 percentage points to 63% against a target of below 60%. Barclays says that it is “evaluating actions to reduce structural costs to help drive future returns. This may result in material additional charges in Q4 2023.” In other words, it is assessing further cost-cutting. Looking ahead, the bank forecasts a UK net interest margin in the range of 3.05%-3.10% for 2023.
Barclays UK highlights
Barclays UK delivered a RoTE of 20.6% supported by the higher interest rate environment. Profit before tax increases 16% to £2.3bn for the year to date. Net interest income rises by 13% to £4.86bn with a NIM of 3.15% (Q322 YTD: 2.78%). Personal Banking income increases by 11% to £3.66bn. This is driven by higher interest rates, partially offset by mortgage margin compression and lower current accounts deposit volumes consistent with wider market trends and cost of living pressures. Barclaycard Consumer UK income decreases by 12% to £722m. Higher customer spend volumes are more than offset by lower interest earning lending balances. Credit impairment charges increase to £267m (Q322 YTD: £129m). UK cards 30- and 90-day arrears remain low at 0.9% (Q322: 1.0%) and 0.2% (Q322: 0.3%) respectively.
C. S. Venkatakrishnan, Group Chief Executive, said: “We delivered an 11.0% RoTE in Q3, against a mixed market backdrop, as we continued to manage credit well, remained disciplined on costs and maintained a strong capital position, with a Common Equity Tier 1 (CET1) ratio of 14.0%. We see further opportunities to enhance returns for shareholders through cost efficiencies and disciplined capital allocation across the group. We will provide an Investor Update at FY23 results which will include setting out our capital allocation priorities, as well as revised financial targets”
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