UPDATE 4-Barclays Third Quarter Profit Doubles Amid Global Merger Frenzy


* Third quarter pre-tax profit doubles to £ 2 billion

* Economic forecasts revised upwards despite recent turmoil

* Fixed income trading suffers from reduced demand (adds comments from Barclays CEO and CFO)

By Lawrence White and Iain Withers

LONDON, Oct.21 (Reuters) – Barclays on Thursday announced a doubling of its third-quarter profits, beating market expectations, as it followed rivals on Wall Street in reaping exceptional investment banking fees thanks to a increase in advisory mandates and share exchanges.

The UK bank posted pre-tax profit of £ 2bn ($ 2.8bn) for the July-September period, better than the £ 1.6bn average analyst forecast and double the 1, £ 1 billion she made in the same period a year ago.

The strong performance showed the value of Barclays’ U.S. operations, where it makes nearly half of its revenue, and UK bank balance sheets hold steady amid the pandemic with the rest of the industry expected to report over the next two years. next weeks.

Barclays’ advisory and equity business posted a record performance in the first nine months of the year, the bank said, generating a return on equity for the investment bank as a whole of 16. 4% against 10.5% a year ago.

“While the performance of the CIB (investment bank) continues to be an asset for the group, we are also seeing a recovery in consumption and the first signs of a more favorable interest rate environment”, said the CEO of Barclays, Jes Staley.

Staley told reporters the lender was relatively relaxed about the prospect of rising inflation in Britain, saying annual price hikes of up to 4% could be positive for the bank as long as it is supported through economic growth.

His remarks contrast with those of several other large companies that reported profits on Thursday, including consumer products giant Unilever which warned that mounting inflation was forcing it to raise prices.

Barclays results were boosted by the bank releasing £ 622million of cash set aside for bad debts that have yet to materialize, after government support measures backed businesses.

“Record third quarter profit for Barclays illustrates the turnaround in the fortunes of major UK banks from last year,” said Zoe Gillespie, chief investment officer at Brewin Dolphin.

The release of the provision comes amid a period of turmoil for the UK economy, with supply chain disruptions and fuel shortages erupting in September, shaking consumer and business confidence.

Barclays nonetheless improved its economic forecast for the UK from the previous quarter and said it expected the country’s GDP to reach pre-pandemic levels by early 2022.

But the bank warned that uncertainty remained relatively high, with a significant number of jobs threatened with layoffs in its major UK and US markets as government support measures were withdrawn.

Barclays has hinted it could close more branches in Britain due to more online banking customers since the pandemic.

“We will provide more details once we complete these plans… the only thing I will say is that this is a step towards digitizing your business,” said CFO Tushar Morzaria.

INVESTMENT BANK

Barclays is now the only UK bank to compete with its Wall Street rivals in their home turf in the core investment banking business of advisory, equities and fixed income.

This has helped him capitalize on soaring M&A fees that saw US peers such as Goldman Sachs and Morgan Stanley crush earnings estimates for the third quarter as global merger volumes broke records. all time.

Barclays said the investment banking income from transaction advice reached £ 971m in the third quarter, up from £ 610m in the same period a year ago, while income from equities rose by 10%.

The bank’s Fixed Income, Currencies and Commodities (FICC) division, however, saw revenue drop to £ 803 million, from £ 1 billion in the same quarter a year ago.

The lender said the weaker performance was due to falling global interest rates which narrowed spreads on fixed income products, resulting in lower customer demand than in the same period of the year. last.

Its shares opened flat and were down 0.6% for the last time at 0811 GMT.

Barclays is the first major UK lender to update the market on its third quarter results. HSBC reports Monday, followed by Lloyds on Thursday October 28, NatWest on Friday October 29, and Standard Chartered on November 2.

($ 1 = 0.7242 pounds) (Reporting by Lawrence White, Iain Withers and Muvija M; Editing by Rachel Armstrong, Carmel Crimmins and Emelia Sithole-Matarise)