Barclays posts another profit on reduced bad loan expectations

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Barclays PLC (LON:BARC) posted another profit in the third quarter of 2020 as it made a smaller provision for bad loans arising from the coronavirus (COVID-19) pandemic and its investment bank continued to thrive.

After taking COVID-19 impairment charges of £3.7bn in the first half of the year, Barclays added a much smaller £608mln in the third quarter.

“We expect the impairment charge in the second half of the year to be materially lower than the first half,” said Barclays chief executive Jes Staley, in the results statement, with provisions seen lower still next year.

There was another strong performance from its corporate and investment bank, with income of £2.9bn up 11% on last year although down 12% on the second quarter.

The FTSE 100-listed lender’s group income of £5.2bn was down 6% on last year but pretty much flat compared to the second quarter, with Barclays UK income of £1.6bn up 6% quarter on quarter as net interest margin inched up to 2.51% from 2.48% in the previous quarter.

“Barclays UK also returned to profitability in the third quarter, with profit before tax of £196m, as economic activity recovered from the spring low point and impairment charges reduced,” said Staley.

Profit before tax of £1.1bn compared to £1.3bn in the second quarter, with underlying profits before provisions came to £2.4bn versus £3.3bn a year ago.

The CET1 capital ratio of 14.6% increased from 14.2% over the quarter, more than 300 basis points above regulatory requirements.

Staley said the board will provide an update on its dividend policy and when payments will resume at the full-year results early next year.

Shares in the bank jumped 4.5% to 108.96p in early trade on Friday.

Analyst at broker Shore Capital said the results “were much better than expected” mainly due to better than expected income growth from the investment bank along with lower than expected impairments. 

The capital ratio was a further significant positive surprise versus the consensus forecast, with the only notable area of disappointment being a reduction in tangible net asset value per share caused by tightening of spreads and currency movements. 

   –Adds share price and broker comment–

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