Barclays shares fall despite third-quarter profits jump as trading arm struggles

 
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Weak performance from the investment bank held back Barclays (Source: Getty)

Profits at Barclays bank rose to £1.1bn but a weak trading performance in its investment bank held back the group, according to third-quarter results released today.

Shares fell by more than four per cent at the time of writing after a 14 per cent decline in markets income dragged on revenues, although UK consumer income edged up.

The figures

Profits before tax in the third quarter rose to £1.1bn, up from £659m in the second quarter and £837m in the third quarter of 2016. Attributable profits rose to £583m, up from £414m in the third quarter of 2016.

Net interest income fell by £320m year-on-year to fall below £2.5bn, while net fee, commission and other income was flat year-on-year at £2.7bn.

Impairments fell year-on-year for the quarter to £709m. Operating expenses fell to £3.4bn, down from £4.3bn in the same period last year, in part because of a fall in costs from compensation for misselling payment protection insurance.

Why it's interesting

Analysts described the update as "disappointing", after revenues fell well short of consensus expectations because of the fall in investment bank revenues. Investment banks around the world have struggled with falling trading revenues, after the Brexit vote in 2016 followed by the election of US President Donald Trump contributed to a sharp rise in activity which has since dissipated.

Barclays' investment bank has struggled against its peers, with some analysts and investors calling for the costly and risky division to shrink.

The bank's prospects are also clouded by a looming US Department of Justice fine for misselling retail mortgage-backed securities, which could reach billions of dollars, while investigations over the 2008 rights issue continue.

Nevertheless, Jes Staley, Barclays' chief executive, felt confident enough to set new profitability targets for 2019 and 2020. He wants to raise return on tangible equity to nine per cent then 10 per cent by the end of the decade, from 7.1 per cent reported today.

What Barclays said

Staley said: "The third quarter of 2017 was particularly significant for Barclays as it was the first for many years in which we have not been in some state of restructuring.

Having closed the non-core unit, and sold our controlling interest in Barclays Africa in June, we now have the end state transatlantic consumer and wholesale bank – in Barclays UK and Barclays International – which we set out to build in March of 2016.

"The third quarter was clearly a difficult one for our markets business within BI. A lack of volume and volatility in FICC [fixed income, currencies and commodities] hit markets revenues hard across the industry, and we were no exception to this trend."

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