Investment banking business remains strong, Barclays (BCS.US) beats Q3 profit expectations
1min read Barclays (BCS.US) reported its Q3 earnings on Thursday, Eastern Time, showing that the bank's Q3 revenue was GBP6.5bn, slightly above the expected GBP6.39bn, and its attributable net profit grew 23% YoY to GBP1.6bn (USD2bn), far exceeding the 11.7bn expected by LSEG surveying analysts.
The bank's tangible common equity (RoTE) rose from 9.9% in Q2 to 12.3%, and its CET1 ratio (a measure of solvency) rose from 13.6% to 13.8%.
Earlier this year, Barclays announced a strategic shift aimed at cutting costs, boosting shareholder returns and stabilizing long-term financial performance, focusing more on domestic lending while reducing costs in its more volatile investment banking division. This strategy includes the acquisition of Tesco Bank, a UK retail bank.
Barclays' net profit in Q2 slightly declined YoY, with a drop in revenue from its UK consumer and corporate banking units, while its investment banking unit's net profit grew 10%. The gaps narrowed in Q3. The bank's domestic banking revenue grew 4%, and it raised its annual net interest income (NII) expectation for UK retail to GBP6.5bn from GBP6.3bn. The revenue from its corporate banking business grew 1% YoY due to the increase in average deposit balances. In addition, its investment banking revenue grew 6%, mainly due to a significant increase in M&A and trading activities in the quarter, similar to other Wall Street giants.
Barclays executives said earlier this month that the bank had achieved significant growth in trading and equity capital markets, following a broad restructuring of its industry coverage and investment in employees in key sectors such as energy transition, industry, healthcare, and technology.
Barclays' shares have soared 55% so far this year after falling in 2023.
As interest rates decline, banks may face a weakening net interest margin, and several banks have announced restructuring, simplification, and cost-cutting plans. HSBC earlier this week said it would integrate its businesses into four business units. Barclays split its businesses from the previous three business units into five units, called "Venkat" by the CEO, which is expected to help improve transparency on the performance of each business.
Deutsche Bank (DB.US) also reported its Q3 results on Wednesday, with net revenue growing 5% YoY to EUR7.501bn, topping analysts' average expectation of EUR7.338bn; its attributable net profit grew 42% YoY to EUR1.461bn, topping market expectations. The bank's investment banking and asset management units' revenue grew 11% YoY.
