Barclays sets bar high with these Q3 results

Its shares have been a massive success recently, trading at a three-year high, and Barclays continues to reap the benefits of its diversified model.

Barclays (LSE:BARC) has again set the bar high for its peers to follow, even if there are some niggles within these third-quarter numbers.

Net Interest Income declined by 7% and Net Interest Margin unsurprisingly remains under pressure, coming in at 2.5% compared to 2.6% a year previously.

In the Barclaycard unit, the figures are feeling the effect of reduced borrowing and increased repayment by customers, resulting in an overall drop of 6% in income, while the Fixed Interest unit within the Investment Bank suffered from strong comparatives and lower levels of activity as income fell by 33%. Meanwhile, the cost income ratio remains at 64%, in excess of the bank’s own target of under 60%.

However, for the most part, Barclays continues to reap the benefits of its diversified model, underpinned by a balance sheet which remains in rude health.

The capital cushion, or CET1 ratio, now stands at 15.4%, as compared to 15.1% in the last quarter and 14.6% in the corresponding period last year. The liquidity pool and coverage ratio are far in excess of regulatory requirements, at £293 billion and 161% respectively, enabling the bank to reiterate its commitment to the return of capital by way of share buybacks and dividends. In terms of the latter, a projected yield of around 4% is a far cry from the 9.6% yield pre-pandemic, but is nonetheless another attraction in the current interest rate environment for income-seekers.

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Meanwhile, strong mortgage volumes reflect the strength of the housing market at present and the mortgage availability which the likes of Barclays provide. There has also been an increase in consumer spending in both the UK and the US as some pent-up demand has been released following the general easing of lockdowns.

Within the Corporate & Investment Bank, a surge in investment banking fees and equity trading propelled the unit to a Return on Tangible Equity of 16.4%, contributing to a group total of 14.9%. Not only is this a significant improvement from the previous year’s return of 3.6%, but is also comfortably above the group target of over 10%.

At the same time, the bank has now released £600 million of impairments in the year to date. At this point in 2020 the figure was a net charge of £4.3 billion, which has turbocharged record pre-tax profit in the year to date of £6.9 billion, and £2 billion in the quarter, both of which are comfortably in excess of market expectations.

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With an upbeat outlook going into the fourth quarter, despite the economic challenges which are currently in evidence, Barclays is set fair to continue its impressive advance. Over the last year the shares are up by 90%, as compared to a gain of 25% for the wider FTSE100, while the market consensus of a "strong buy" reaffirms the bank’s position as the preferred play in the sector.