25th Oct 2019 08:27
(Alliance News) - Barclays PLC on Friday reported a sharp drop in quarterly profit as the lender's operating expenses rose steeply, though Chief Executive Jes Staley described it as a "resilient" period for the bank.
In the three months to September 30, the lender recorded a pretax profit of GBP246 million, 83% lower than the GBP1.46 billion posted a year earlier. Excluding litigation and conduct charges, third-quarter pretax profit rose 18% to GBP1.81 billion.
The sharp quarterly drop was attributed to a GBP1.4 billion payment protection insurance provision. Operating expenses rose 42% to GBP4.86 billion from GBP3.43 billion, with litigation & conduct charges jumping to GBP1.57 billion from GBP105 million the year before.
In September, the lender warned of an "exceptional" level of PPI claims in the days leading up to the Financial Conduct Authority's deadline of August 29. To September 30, Barclays has recognised GBP11 billion of cumulative provisions.
As a result, the cost-to-income ratio worsened considerably to 88% for the quarter from 67% the year before.
In better news for the lender, third-quarter net interest income rose 2.5% to GBP2.45 billion from GBP2.39 billion the year before. Total income grew 8.0% to GBP5.54 billion.
"These represent another set of consistent and resilient results, and they show the benefits of our diversified model - one which allows us to weather today's macro headwinds, and grow our businesses and profitability over time," Chief Executive Jes Staley said.
The group finished September with GBP313.3 billion in risk-weighted assets, down 1.8% over the three month period, but slightly higher over the course of 2019.
The lender ended the quarter with a CET1 ratio of 13.4%, flat on the previous quarter, and up from 13.2% at the start of 2019.
Barclays UK, the lender's domestic retail and commercial bank, posted a quarterly loss of GBP687 million compared to a GBP740 million profit the year before, attributed to the large PPI provision.
The unit's net interest margin slipped to 3.10% compared to 3.22% the year before but improved on the 3.05% mark seen in the second quarter.
Barclays Corporate & Investment Bank, which sits within Barclays International, recorded a profit of GBP882 million in the third quarter, 77% higher year on year and broadly flat compared to the previous quarter.
In the nine months to September 30, pretax profit for Barclays as a whole improved 4.5% year on year to GBP3.26 billion with total income growing 1.7% to GBP16.33 billion.
Return on tangible equity in 2019 to date sits at 5.1%, up from 4.9% in the same period the year prior.
Staley added: "These results show we remain on track to achieve our target of a group return of greater than 9% for 2019. We continue to target an RoTE of greater than 10% in 2020, though we acknowledge that the outlook for next year is unquestionably more challenging now than it appeared a year ago, in particular given the uncertainty around the UK economy and the interest rate environment.
"Despite the impact to profitability of the GBP1.4 billion PPI provision, our CET1 ratio continues to be within our target, which is revised to about 13.5%, now that our operational RWAs are accounted for more consistently with UK peers."
Shares in Barclays were 2.8% higher in London on Friday morning at 171.04 pence each.
By Paul McGowan; [email protected]
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