Thursday 27 October 2016 7:49 am

Barclays profits boosted for third quarter but PPI rears its ugly head again

Barclays has today revealed its profits soared during the third quarter of its year, but its year to date is lagging behind 2015.

The figures

The banking giant announced statutory pre-tax profits of £837m for the three months to September, up 35 per cent from the £619m it revealed for the same period last year. Meanwhile, total income net of insurance claims slumped slightly to £5.4bn, down one per cent from £5.5bn.

However, pre-tax profits for the year to date were £2.9bn, down 10 per cent compared with £3.2bn the year before. Total income also slipped to £16.5bn, down six per cent from £17.6bn.

The bank also set aside an additional £600m for payment protection insurance (PPI) claims it expects during its third quarter, bringing the total it has added to its PPI provision during the year to £1bnalmost mirroring the announcement Lloyds made yesterday

Shares in the bank are trading down 0.2 per cent at 181.5p at time of writing. 

Why it's important

It's a tough time to be a bank. Lower for longer interest rates have put a squeeze on the amount of revenue the sector can hope to bring in, increasing red tape has pushed up costs and political uncertainty, such as June's referendum, has put many clients off big ticket decisions. 

Barclays, however, has not been one to take the business unfriendly environment lying down, undergoing an extensive restructuring programme and winding down the non-core parts of its business.

It's unsurprising that today's figures revealed the non-core division continues to drag on the bank's performance. In the first nine months of the year, profits before tax in the core business grew four per cent to £4.9bn from £4.7bn, while losses in non-core slumped 33 per cent deeper into the red, growing to just short of £2bn from £1.5bn.

Meanwhile, PPI has also made itself even more problematic for banks in recent months, after the Financial Conduct Authority announced in August it was setting a deadline for complaints of June 2019, not spring of 2018 as had previously been proposed.

What Barclays said

Jes Staley, group chief executive, said:

The growing momentum in attaining our strategic goals means we can feel optimistic of our prospects of completing the restructuring of Barclays – a restructuring to a simplified transatlantic, consumer, corporate and investment bank with the capacity to deliver sustainable high quality returns for shareholders. This quarter has seen us take another important stride toward that state.

Staley also told reporters the management team were still "looking at our options" as to what changes may need to be made to the business model in light of the Brexit vote. He added the bank wanted to "stay as fully invested in the UK as we can" and any shifts were likely to take place in "incremental steps".

What analysts said

Laith Khalaf, senior analyst at Hargreaves Lansdown, commented:

Barclays continues to pull the old good bank, bad bank routine, though soon it’s going to need to find a different tack, because the bad bank is being consigned to the history books. Barclays expect to close this side of the business next year, which will be a big step for the bank, and will allow it to fully focus on its core activities.