Barclays sees triple net profit in latest quarter

Barclays PLC logged a stellar performance in its first quarter with net profit almost tripling on the back of a brighter economic outlook for both the UK and US.

The stimulation packages by central banks, vaccination rollout and a sharp drop in new coronavirus-related loan-loss reserves, as well as decreasing loan defaults, all acted together to push the bank to profit.

The chief executive of Barclays, Jes Staley, said, ”We estimate the UK economy will grow at its fastest rate since 1948, that’s pretty spectacular.”

Barclays HQ

Staley added, “We see quite a robust economic recovery in 2021. We think that will carry on to 2022.” He also sounded a cautious note about its British consumer unit. “While evidence of recovery is encouraging, we have continued to take a cautious view of the impact of the pandemic on the business. Headwinds to income in Barclays UK are expected to persist in 2021, driven by the subdued demand for unsecured lending and the low-interest-rate environment.”

However, Barclays did not reduce its overall reserves for bad loans, which remain at more than £9bn, unlike other banks such as HSBC, Lloyds and NatWest.

The bank made a pre-tax profit of £2.4bn ($3.3bn) on revenues of £5.9bn in the first quarter of 2021. Analysts had expected Barclays to report a pre-tax profit of £1.75bn on revenue of £5.15bn.

Banking fees and equity trading income rose strongly as the investment bank benefited from a recent IPO boom.

The bank said equity trading revenue surged 65 percent to a record £932m, but fixed-income and currency trading (FICC) dropped 35 percent. Barclays also claimed the capital markets and advisory division had its “best ever quarter on a comparable basis”, with income rising 35 percent.

While revenues and profits beat forecasts, costs were higher than expected. Operating costs were £3.5bn in the quarter, which was 5% higher than expected and a warning that annual expenses would continue to rise in 2021. Analysts at Jefferies said it was “surely the latest investment controversy”. The bank’s shares slumped 5.5% in London.

The higher costs were a result of successes at the investment bank. Bonus payments are tied to performance, hence, better performance led to higher payouts, said Staley.

Barclays intends to review its real estate soon with the intention of cutting office space as working models change to remote work on a wide scale due to Covid.

Staley has been trying hard to stave off activist investor Edward Bramson’s attempt to cut down the bank’s investment division and unseat him. Staley has insisted on continuing with the investment division as a counterbalance to retail banking, which is in a crisis. His confidence has paid off with the investment division turning in a good performance.

Staley listed new growth opportunities for the bank too, including a deal to issue Gap’s new credit card in the US and a point-of-sale finance partnership with Amazon, which will be expanded to the UK later this year.

The bank has faced some scrutiny in an investigation against disgraced financier Jeffrey Epstein by the Financial Conduct Authority as he was Staley’s client when he was at JPMorgan Chase.

Anna Domanska
Anna Domanska is an Industry Leaders Magazine author possessing wide-range of knowledge for Business News. She is an avid reader and writer of Business and CEO Magazines and a rigorous follower of Business Leaders.

Recent Posts

General Motors Q2 2021 Results Recap

General Motors Q2 2021 Results Recap

General Motors Q2 earnings and revenue missed Wall Street’s expectations even though the world’s leading automaker beat earnings projections.
11 hours ago
UK casts doubt over Nvidia’s Arm acquisition over security risks

UK casts doubt over Nvidia’s Arm acquisition over security risks

UK considers blocking Nvidia’s Arm acquisition due to potential risks to national security. The $40 billion takeover faces similar fate in America, China and the European Union.
18 hours ago
PepsiCo relinquishes control of Tropicana for $3.3 billion

PepsiCo relinquishes control of Tropicana for $3.3 billion

PepsiCo will sell Tropicana and other juice brands to a private equity firm in exchange for pre-tax proceeds of 3.3 billion dollars.
1 day ago
Sanofi bets big on mRNA future with Translate Bio acquisition offer

Sanofi bets big on mRNA future with Translate Bio acquisition offer

Sanofi’s CEO Paul Hudson is dead serious about mRNA technology and capabilities with a $3.2 billion acquisition offer to Translate Bio.
2 days ago
Top 6 Energy Dividend Stocks to include in your portfolio

Top 6 Energy Dividend Stocks to include in your portfolio

The entire energy sector yield hovers around 4%, according to the Energy Select Sector SPDR exchange-traded fund.
2 days ago
Monte dei Paschi performance below par in EU banks stress test

Monte dei Paschi performance below par in EU banks stress test

The depletion of capital at each bank under the test’s harshest scenario will be closely scrutinised, and could potentially lead to hostile takeovers
4 days ago