© Reuters. FILE PHOTO: A branch of Barclays Bank is seen, in London, Britain, February 23, 2022. REUTERS/Peter Nicholls/File Photo
By Lawrence White and Iain Withers
LONDON (Reuters) -Barclays hinted at major cost cutting later this year as the British lender warned competition for savers’ money was eating into its margins, even as it reported quarterly profit that narrowly beat expectations.
Facing a downbeat outlook especially in its home market, the bank said it was “evaluating material structural cost actions” to help improve returns, which could incur hefty charges as soon as the fourth quarter this year.
“These results are likely to lower market expectations further for UK banks, and we see a negative read-across for Lloyds (LON:) and NatWest,” banking analysts at JPMorgan said in a note.
Barclays shares fell nearly 7% in early trading, while shares in rivals Lloyds and NatWest each dipped around 3%.
Barclays Chief Executive C. S. Venkatakrishnan told reporters on a conference call that the company would look for efficiencies in different parts of the bank, without giving details.
The lender kicked off a strategy review earlier this year aimed at reviving its share price and has already started trimming costs, including cutting hundreds of jobs, while Reuters reported it is exploring options for its payments unit.
Banking analysts at Jefferies in a research note asked readers if they were “Looking forward to the Nth restructuring?,” in reference to Barclays’ string of cost cuts, asset sales and strategy tweaks since the 2008 financial crisis.
SLUGGISH INVESTMENT BANK
The lender reported pre-tax profit for the July-September period of 1.9 billion pounds ($2.33 billion) on Tuesday, down from 2 billion pounds a year ago but above a consensus analyst forecast of 1.77 billion pounds.
Barclays reported a 6% drop in income at its investment bank for the quarter, following a similarly downbeat performance at the half-year results update in July.
Revenue in its traditionally strong fixed income, currency and commodities division fell 13% as falling market volatility dampened clients’ enthusiasm for trading.
That compared with mixed performances for the same business at the lender’s Wall Street rivals which reported earnings earlier this month.
Goldman Sachs saw net revenue in the division fall 6% and Morgan Stanley’s slid 11%, while Bank of America and JPMorgan saw 6% and 1% increases respectively.
CUSTOMERS ‘GOING SHOPPING’
Barclays CEO Venkatakrishnan, known inside the bank as ‘Venkat’, said the bank would provide an investor update alongside its full-year results that will set out its capital allocation priorities and revised targets.
The bank said its net interest margin, a key measure of profitability, in its British retail bank would now likely come in at between 3.05%-3.1%, below previous guidance of around 3.15%, as political pressure to help savers and sticky inflation curb profits from lending.
“Consumers are no longer happy to park their cash in low-rate current accounts and are going shopping for higher yields,” said Matt Britzman, equity analyst at Hargreaves Lansdown.
The bank set aside an extra 433 million pounds in the quarter for potentially soured loans, citing updated tougher economic forecasts and an increase in delinquencies in its U.S. cards unit to pre-pandemic levels.
Barclays’ former CEO Jes Staley faces a ban from senior roles in financial services and a 1.8 million pound fine for misleading regulator the Financial Conduct Authority over his relationship with the dead sex offender Jeffrey Epstein, the watchdog said earlier this month.
Staley said he was “very disappointed” by the watchdog’s decision – which he is appealing.
Venkat declined to comment on the matter when asked by reporters on Tuesday.
($1 = 0.8151 pounds)
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