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Barclays profits soar, but weighed down by DoJ fine

The bank reported strong revenue growth in the third quarter, particularly from its trading operations, but group profits were hurt by £2.1 billion misconduct charges.

Barclays Group (LON:BARC) profits before tax increase 23% to £5.3 billion in the third quarter (Q3), with its investment bank business performing particularly well, as equity trading revenues went up 25% from the same period last year to £471 million.

Barclays Group CEO Jes Staley commended the efforts of its corporate and investment bank for outperforming peers like Goldman Sachs (NYSE:GS) and JPMorgan (NYSE:JPM), with the bank advising on ‘three of the largest M&A transactions executed in the period’.

The strength that Barclays investment bank business pours a little water on the proposal by activist investor Edward Bramson to shrink the unit.

Barclays profits hurt by fines

But, despite a strong performance, Barclays profits were dented by misconduct charges of £2.1 billion, including a £1.4 billion settlement with the US Department of Justice in relation to the bank’s mortgage practices and a $400 million charge due to Payment Protection Insurance (PPI) in the first quarter of this year.

Factoring in these fines, brings the bank’s Q3 profits to £3.1 billion, down from 3.45 billion in the same period last year.

Barclays looks brighter

Overall, the bank has posted a strong performance to generate what translates into a major increase in profits, with Barclays outperforming market analysts expectations. Barclays Group saw net profit in Q3 of £1 billion, nearly double from the £583 million is published a year prior.

The results are all the more impressive, considering the bank has undergone a £1 billion ring-fencing plan to split its retail and investment banking divisions, as well as pressure from activist Sherbourne and a myriad of economic headwinds.

‘In spite of macro-economic uncertainty, and particularly concerns over Brexit which weigh heavily on market sentiment, 2018 is proving to be a year of delivery on our strategy at Barclays,’ Staley said.

‘We remain focussed on generating improved returns, and on distributing a greater proportion of excess capital to shareholders over time,’ he added.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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