Barclays reports mixed Q3 results with margin cut

Barclays (LSE: BARC) released its third-quarter financial results today, showing a divergence between revenue and profit performance, along with strategic adjustments that have affected its share price.

Barclays’ total income for the period ending on September 30 recorded a 5.2% increase, climbing from £5.95 billion to £6.26 billion compared to the previous year. However, this figure fell short of the company-compiled consensus, which had set expectations at £6.29 billion.

Despite the revenue hiccup, Barclays managed to outperform market expectations in terms of profit. The bank reported a pretax profit of £1.89 billion for the quarter, marking a modest 4.3% decline from £1.97 billion a year prior. Nevertheless, this result exceeded the company-compiled market consensus of £1.77 billion, providing investors with some solace amid economic uncertainties.

One of the key drivers impacting profit was the surge in credit impairment charges, which spiked by 14% to £433 million from £381 million in the corresponding period the previous year.

Barclays’ UK division, while contributing to the overall income, showed a decrease of 2.2% in total income, reaching £1.87 billion during the third quarter. In contrast, the international segment posted healthier figures, with revenue growing by 9.3% to £4.44 billion from £4.07 billion year-on-year.

The bank, however, shared contrasting guidance. Barclays maintained its annual return on tangible equity forecast of ‘greater than 10%’ but trimmed its net interest margin outlook for the UK arm. The revised projection now anticipates a margin of ‘3.05% to 3.10% in 2023,’ compared to the previous expectation of ‘less than 3.20%’ with a view around 3.15%.

In a statement, Barclays acknowledged the sensitivity of its guidance to deposit balances and changes in interest rate expectations.

While the bank navigated its financial terrain with varying results, it refrained from declaring any new shareholder distributions, underscoring its commitment to maintaining a balanced approach between capital strength, shareholder returns, and business investments. Barclays also reinforced its intent to deliver progressive ordinary dividends and implement share buybacks when appropriate.

In an effort to maintain this commitment, Barclays announced the successful completion of its £750 million share buyback, which was initiated in July. The bank repurchased a total of 493.6 million shares at an average price of 151.94p, signalling its dedication to shareholder value in a complex economic landscape.

Barclays’ third-quarter earnings performance, while mixed, presents a nuanced outlook for investors and stakeholders alike, reflecting the challenging economic environment and the bank’s resilience in the face of market fluctuations.

As a result of these developments, Barclays shares slumped 5.9% to 135.50 pence each in London on Tuesday morning, following the release of these financial updates.