By Lawrence White and Sinead Cruise
LONDON (Reuters) – Barclays’ reported a forecast-beating 18% rise in third-quarter profit on Thursday, and said slower than expected interest rate cuts and improving investment banking prospects would support revenues as it raised its income outlook for the year.
The British bank reported pretax profit for the July-September period of 2.2 billion pounds ($2.85 billion), up from 1.9 billion a year ago and higher than the average of analysts’ forecasts of 1.968 billion pounds.
The lender upgraded its forecast for net interest income for the year, saying it now expects to exceed 11 billion pounds rather than just hit that target.
Barclays shares were trading 1.8% higher at 0707 GMT, outperforming a 0.5% rise in the .
The earnings report from Barclays comes at a time when Europe’s biggest banks are healthier than at any point since the 2008 financial crisis, but are under pressure to show they can sustain earnings even as interest rates fall.
Barclays said it now forecasts three Bank of England rate cuts this year to a final policy rate of 4.5%. It had previously forecast five cuts and a final rate of 4%.
Barclays’ UK business once again delivered robust returns over the period, growing third-quarter returns on tangible equity to 23.4% from 21% a year ago. The lender’s private bank and wealth management reported a larger return of 29% but this was sharply down from the 41.2% last year.
INVESTMENT BANK
Barclays said third-quarter income in its investment bank rose 6% year on year, a strong performance that exceeded expectations but lagged gains at some U.S. and European rivals.
Goldman Sachs was among those reporting rising revenue in the third quarter as corporate fundraising and dealmaking increased and equities trading was boosted by the bullish stock market.
Closer to home, Germany’s Deutsche Bank also produced an 11% year-on-year rise in investment banking revenues, smashing expectations for gains of 6.5% over the third quarter.
At Barclays, third quarter fixed income, currencies and commodities and equities revenue both rose 3% year on year to 1.18 billion pounds and 692 million pounds respectively.
Advisory fee income surged 133% to 186 million pounds while fees generated in the bank’s debt capital markets business rose 48% year on year to 344 million.
Equity fundraising income came in at 64 million pounds – 3% higher year on year but almost half the income reported in the second quarter of 2024.
Barclays’ gains in deal advisory follow an extensive reorganisation of its sector coverage and investment in staff in key sectors such as Energy Transition, Industrials, Healthcare, and Technology, executives at the bank said earlier this month.
The bank in February unveiled its biggest revamp since 2016 in a bid to bolster investor confidence, saying it would push further into domestic lending and reduce the financial resources consumed by its investment bank relative to other businesses.
It also split its business into five operating divisions from a previous three, in a move that the CEO, known internally as Venkat, said would help improve transparency on each business’s performance.
($1 = 0.7733 pounds)
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