BARCLAYS said it would remain “alert to signs of stress” among its customers as rising interest rates and market volatility helped the bank grow third quarter profits to £2 billion.
“Our September data showed a slight fall in consumer confidence,” Barclays group chief executive Coimbatore Sundararajan Venkatakrishnan said of the economic outlook.
People are being prudent by reducing non-essential spending on things like clothing, he added, “as they adjust their household expenditure for large increases in utilities bills.”
Barclays said losses on loans had grown to £381 million in the third quarter from £120m last year, but remained “below historical levels.”
The bank, which employs more than 44,000 people in the UK, grew pre-tax profits for the three months between July and September by 6%, from £1.9 billion last year.
This beat the expectations of analysts, who were forecasting pre-tax profits of around £1.8 billion.
Barclays said it had seen a strong quarter, with a 17% rise in group income year-on-year to £6.4bn across its three businesses.
These are its UK retail bank – Barclays UK – its corporate and investment bank and consumer cards and payments business.
In the UK, Barclays said rising interest rates had driven a 20% rise over the year to £1.6 billion in net interest income.
This is the difference between the income a bank earns from its borrowers and the interest it pays to savers.
To try and combat soaring inflation, the Bank of England has raised interest rates from all-time lows of 0.1% last year to 2.25% this year, making mortgages and loans more expensive.
Rising interest rates and strong growth in new mortgages in 2021 also helped Barclays grow personal banking income in the UK by 14% to £3.3bn.
Business banking income increased 11% to £1.2 billion, driven by rising interest rates and higher revenues from banking transactions.
In its fixed income, currencies and commodities division, which includes bond trading, Barclays almost doubled income in the third quarter to £1.5 billion.
This was fuelled by increased buying and selling after the UK Government’s mini-budget, and reflected “higher levels of activity as we supported our clients through a period of market volatility,” Barclays said.
Costs are also growing for the bank. Compared to last year, group operating expenses are up 18% to £4.1 billion. This was fuelled by the growing value of the dollar against the pound, the impact of inflation and investment spending in the business, Barclays said.
Mr Venkatakrishnan said the bank had not seen any emerging signs of stress so far, but had put in place a range of options to support its personal and businesses customers.
This includes providing basic information, like mortgage renewal dates or how to build a household budget, to “helping those customers with more complex needs.”
Mr Venkatakrishnan said he was pleased with the results, but was “very conscious that we live in unusually uncertain times.”
John Moore, an analyst at RBC Brewin Dolphin, said Barclays had delivered a strong set of results, but with a note of caution. The prospect of a windfall tax on banks – as proposed by the Liberal Democrats this week – may have contributed to this, he suggested. Mr Moore also predicted that the “uncertain economic backdrop” would likely put a brake on some of Barclays’ markets.
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