Barclays BCS -1.00%
PLC profit jumped in the third quarter, boosted by rising interest rates, increased household use of credit cards and volatile bond markets.
Net profit rose 10% from a year earlier to £1.5 billion, equivalent to $1.72 billion, in the three months through September, the London-based bank said on Wednesday. The total exceeded analysts’ expectations.
Barclays runs the world’s sixth largest investment bank, as well as retail and credit card businesses in the US and the UK
Barclays joined other big lenders in preparing for the recession. The bank set aside £381 million in the third quarter, more than triple the amount a year earlier, to cover losses if consumers and businesses fall behind on loans in the coming months. So far, however, Barclays said there are no signs of trouble.
Consumers charged more on credit cards issued by Barclays – including those linked to a new partnership with US retailer Gap Inc.
-during the summer. That could be a sign that borrowers are using cards to cope with higher inflation as prices rise faster than paychecks. But households largely stayed on top of payments, Barclays said. Credit card delinquencies, a measure of late payments, remained low.
“So far we haven’t seen signs of stress emerging,” in the credit card business, Barclays CEO CS Venkatakrishnan told reporters. “People are smart.”
Barclays also got a boost from interest rate increases by central banks to tame inflation. Those increases enable Barclays to charge higher rates on mortgages, credit cards and other loans. What Barclays earned in interest, or net interest income, rose 20% in the third quarter from a year earlier.
Meanwhile, Barclays said there were more trades due to volatility in bond and currency markets. Revenue from its fixed income, currency and commodities business rose 93% from a year earlier to £1.546 billion, the biggest third quarter increase on record based on figures going back to 2014.
Other major investment banks reported weak earnings in the third quarter due in part to the slowing global economy. Due to high inflation, rising interest rates and slowing economic growth, many companies are halting plans to buy or merge with other businesses, or sell shares to the public.
Investment banks provide advice on such markets, and the slowdown has reduced their main source of earnings, although volatile markets mean securities trading firms have fared better. Barclays said the amount it earned from investment-banking fees fell 45% year-on-year.
Barclays shares in London have fallen by around 20% this year. They were down 0.3% on Wednesday.
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