Barclays shares hit nine-year high after third quarter profit jumps 23%, beating expectations

LONDON — British bank Barclays on Thursday reported £1.6 billion ($2 billion) net profit attributable to shareholders for the third quarter, beating expectations.

The result compared with the £1.17 billion net profit forecast in an LSEG poll of analysts and was 23% higher than the same period in 2023.

Revenue for the period came in at £6.5 billion, slightly ahead of a forecast of £6.39 billion.

Barclays shares had climbed 4.3% by 9:30 a.m. in London, reaching their highest level since October 2015, according to LSEG data.

The lender's return on tangible equity rose to 12.3% from 9.9% in the second quarter, as its CET1 ratio — a measure of solvency — rose to 13.8% from 13.6%.

Earlier this year, Barclays announced a strategic overhaul in an effort to cut costs, boost shareholder returns and stabilize its long-term financial performance, placing more focus on domestic lending while reducing costs at its more volatile investment banking unit. That strategy has included the acquisition of U.K. retail banking business Tesco Bank.

In the second quarter, Barclays net profit fell slightly year-on-year amid lower income at its U.K. consumer bank and corporate bank, as net profit jumped 10% at its investment bank.

Those gaps closed in the third quarter, with domestic bank income up 4%, with the lender raising its annual forecast for U.K. retail net interest income to £6.5 billion from £6.3 billion. Corporate bank income was 1% higher due to a rise in average deposit balances, while investment banking income gained 6%.

Amid declines, income at Barclays' private U.S. consumer bank dipped 2% year-on-year as its wealth management unit fell 3%.

Barclays CEO C. S. Venkatakrishnan told CNBC on Thursday the results showed the bank was on track to meet the targets it had set out in February.

"We are guiding upwards in our net interest income, and we've had two continuous quarters of NII expansion in our business in the U.K. So we're guiding up, both for the U.K. business and for the bank as a whole, and then we see costs very much under control."

The bank now sees group NII of above £11 billion for full-year 2024, from a previous outlook of £11 billion.

Analysts at Citi called it a "good set of results," especially for the domestic business, highlighting the upgraded U.K. NII guidance.

"We see high single-digit upgrades to 2024 consensus [earnings per share] post these strong Q3 results and see low-single digit upgrades to 2025+ consensus EPS, mainly on the stronger U.K. NII," they said in a Thursday note.

Barclays shares have soared 55% in the year to date after dipping in 2023.

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Several banks have announced plans to restructure, streamline operations and cut costs as they face a potential weakening of net interest margins as interest rates fall. HSBC earlier this week said it would consolidate its operations into four business units.

"What I would say on interest rates is, Barclays has had a very disciplined approach to interest rate management, and so we've got this thing called the structural hedge, which is a way of smoothing out the effects of interest rates on our income, and that's part of what is causing our NII expansion over the last couple of quarters. So we are pretty well protected against changes in interest rates in the near term," Venkatakrishnan said.

"Despite past disappointments, the recent strategy update has positively shifted the investment narrative for Barclays, with clear targets across divisions and a focus on higher profitability areas," Will Howlett, financials analyst at Quilter Cheviot, said in a note.

Deutsche Bank kicked off the third-quarter reporting season on Wednesday, posting higher-than-expected net profit as revenue at both its investment bank and asset management divisions jumped 11% year-on-year.