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* Q3 profit before tax doubles to 2 billion pounds
* Economic forecasts upgraded despite recent turbulence
* Fixed income trading suffers from reduced demand
(Adds Barclays CEO, CFO comments)
By Lawrence White and Iain Withers
LONDON, Oct 21 (Reuters) - Barclays reported on
Thursday a doubling of third-quarter profits, beating market
expectations, as it followed Wall Street rivals in reaping
bumper investment banking fees from a surge in advisory mandates
and equities trading.
The British bank posted profit before tax of 2 billion
pounds ($2.8 billion) for the July-September period, better than
the 1.6 billion pounds average of analysts' forecasts and twice
the 1.1 billion pounds it made in the same period a year ago.
The strong performance showed the value of Barclays' U.S.
business, where it makes nearly half its income, and British
banks' balance sheets holding up amid the pandemic with the rest
of the sector due to report over the next two weeks.
Barclays' advisory and equities business had a record
performance in the first nine months of the year, the bank said,
driving a return on equity for the overall investment bank of
16.4% compared to 10.5% a year ago.
"While the CIB (investment bank) performance continues to be
an area of strength for the group, we are also seeing evidence
of a consumer recovery and the early signs of a more favourable
rate environment," Barclays CEO Jes Staley said.
Staley told reporters the lender was relatively relaxed
about the prospect of growing inflation in Britain, saying
annual price rises of up to 4% could be positive for the bank so
long as it was supported by economic growth.
His remarks contrasted with several other big companies
reporting earnings on Thursday, including consumer products
giant Unilever which warned intensifying inflation was forcing
it to hike prices.
Barclays' results were boosted by the bank releasing 622
million pounds in cash set aside for bad debt charges that have
yet to materialise, after government support measures propped up
businesses.
"A record profit for Barclays in the third quarter is
illustrative of the turnaround in fortunes the UK's major banks
have had compared to where they were this time last year," said
Zoe Gillespie, investment manager at Brewin Dolphin
The provision release comes despite a turbulent period for
the British economy, with supply chain disruptions and fuel
shortages that flared up in September denting consumer and
business confidence.
Barclays nonetheless upgraded its economic forecasts for the
United Kingdom compared to the previous quarter and said it
expected the country's GDP to hit pre-pandemic levels by early
2022.
But the bank warned that uncertainty remained relatively
high, with a significant number of jobs at risk of redundancy in
its key UK and U.S. markets as government support measures were
withdrawn.
Barclays hinted it could close more branches in Britain as a
result of more customers banking online since the pandemic.
"We'll provide more detail once we've completed those plans
... the only thing I'll say is it's a march towards making your
business more and more digital," Finance Director Tushar
Morzaria said.
INVESTMENT BANK
Barclays is alone these days among British banks in
competing with Wall Street rivals on their home turf across the
main investment banking businesses of advisory, equities and
fixed income.
That helped it cash in on the surge in M&A fees that saw
U.S. peers such as Goldman Sachs and Morgan Stanley
smash earnings estimates for the third quarter, as global
merger volumes shattered all-time records.
Barclays reported investment banking income from advising on
deals rose to 971 million pounds in the third quarter from 610
million in the same period a year ago, while equities income
rose 10%.
The bank's fixed income, currencies and commodities (FICC)
division, however, saw income fall to 803 million pounds from 1
billion pounds in the same quarter a year ago.
The lender said the weaker performance was due to lower
global interest rates that narrowed spreads on fixed income
products, driving lower client demand than in the same period
last year.
Its shares opened flat and were last down 0.6% at 0811 GMT.
Barclays is the first major British lender to update the
market on its third quarter earnings. HSBC reports on
Monday, followed by Lloyds on Thursday, Oct. 28,
NatWest on Friday Oct. 29 and Standard Chartered
on Nov. 2.
($1 = 0.7242 pounds)
(Reporting By Lawrence White, Iain Withers and Muvija M;
Editing by Rachel Armstrong, Carmel Crimmins and Emelia
Sithole-Matarise)
