- Revenues and earnings ahead of estimates
- Strong dollar helps operating margins
- Cost of its US mix-up weighs on sentiment
Shares in Barclays (BARC) eased 1.5% to 148p as the ongoing cost of its over-issuance of securities in the US cast a shadow over its third quarter results announcement.
Overall, the results were slightly ahead of expectations thanks to higher interest rates driving net income growth and a tailwind to margins from the strong US dollar.
At the top line, group revenues were up 14% to £19.155 billion with the international business posting a 15% increase in income.
Within the international division, the investment bank - which makes up the bulk of earnings - grew its revenues 11%, but it was the consumer, cards and payment business which over-delivered with growth of 31% in revenues compared with last year.
There was positive news in the UK as well, where net interest income rose a forecast-beating 10% to £4.29 billion thanks to the effect of rising interest rates while costs were relatively flat on last year.
The bank put aside £129 million in provisions for bad loans compared with a write-back of £306 million in the third quarter of 2021 but compared with the level of provisions during the financial crisis the latest charge is significantly lower.
Interestingly, the bank revealed that between 40% and 45% of its revenues are now dollar-based compared to only around 30% of its costs so the strong dollar has had a beneficial effect on operating profits.
WHAT WAS THE BAD NEWS?
Unfortunately for investors, the issue of misconduct in its structured products division hasn’t gone away and continues to hang over the shares despite the better results.
Last month the bank agreed to a $361 million fine from the Securities and Exchange Commission for what was described as a ‘simply staggering’ failure of governance in the issue of structured products in the US market.
The bank was found guilty of failing to implement safeguards on the amount of complex structured products it could sell, resulting in it over-issuing $17.7 billion of securities.
Barclays had to buy the unregistered securities back from investors at a premium to their original sale price, incurring a loss of £1.3 billion in the second quarter.
