Barclays Beats Expectations For Q3 With Steep Drop In Provisions For Bad Loans

A net profit of £611 million ($797.7 million) was reported for the third quarter by the British bank Barclays on Friday as the lender attempts to stage a recovery from the hit it took because of the novel coronavirus pandemic.

A sharp reduction in coronavirus-related impairment charges by the bank resulted in the bank reporting a net profit attributable to shareholders of £273.5 million which was more than double of what analyst were expecting.

Following the addition of another £1.6 billion of loan loss provisions in the second quarter, the British lender had reported a net income of £695 million for the first half of 2020.

For the third quarter however the bank significantly reduced the cash it set aside to accommodate bad loans which was just £608 million and much lower than the £1 billion  tha had been expected by analysts.

“In the first half of this year we took a very, very robust impairment charge and our impairment reserves, so our reserves for credit losses, is well north of £9 billion right now,” Barclays CEO Jes Staley said.

“That is the highest level of reserves that we have ever had, so we feel that we are very well situated in our balance sheet to deal with whatever economy we face in the latter part of this year and next year.”

The group income however took a hit at £5.2 billion compared to the £5.54 billion the company had reported in the same period last year. The company also reported return on tangible equity (RoTE) at 5.1 per cent which was higher than the 0.7 per cent achieved by it in the previous quarter and much higher than the -2.4 per cent it had reported for the third quarter of 2019.

The bank has issued a £100 million Community Aid package distributed among charities in the U.K. in a bid to help mitigate the impact of the pandemic.

“This support is made partly possible because we have a resilient and diversified business model which means we remain profitable as we weather this crisis, with strong income performance in our CIB (corporate and investment bank) more than offsetting headwinds in our consumer businesses,” Staley said in a statement Friday.

An attributable profit before tax of £627 million was posted by the CIB business which was lower than the £694 million that it had reported in the previous quarter.

Over the last six months, more than $1 trillion in debt financing for governments and corporations around the world had been underwritten by the investment bank, Staley said,

After being hit by £1.4 billion ($1.8 billion) worth of insurance claims, the bank had reported a net loss of £292 million for the same period in the previous year.

So far this earnings season, analysts have generally been surprised as major banks have reported mostly on the upside of expectations. Earlier this week, a net income of $2.1 billion was reported by UBS which quite comfortably surpassed analysts’ expectations.

(Adapted from CNBC.com)



Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability, Uncategorized

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