Pre-tax profit of £1.1bn from FTSE 100 bank Barclays (BARC) came in below consensus forecasts of £1.4bn in its third quarter to 30 September.
The bank’s net interest income fell by £320m year-on-year to below £2.5bn. Its net fee, commission and other income was flat at £2.7bn again on a year-on-year basis.
Shares in the bank fell 6.7% to 183.9p, and soared to the top of the FTSE 100 loser board. Investors are rapidly losing patience in the bank's repeatedly limp efforts to get its house in order.
INVESTMENT BANKING HEADACHE
The main culprit for Barclay's poor performance versus expectations is its investment banking division. Chief executive Jes Staley continues to blame low volumes and limited market volatility across fixed income, currency and commodity markets.
Staley may deserve some sympathy here since most of the investment banking world seems to be wheeling out the same rhetoric.
Barclays International, which houses its investment banking division, saw pre-tax profits fall to £652m from over £1bn a year before.
Charges for things like bad debts are down - to £709m from £789m - while the bank has slashed around £1bn off operating costs. No increase in PPI payment provisions may also offer investors some encouragement.
PATIENCE BEING TESTED
Shareholder frustration comes despite the bank setting out clear timelines to meet its objectives. These include targeting a return on tangible equity (ROTE) above 9% and 10% in 2019 and 2020 respectively, albeit modest targets.
ROTE is the key measure for a bank’s ability to generate profits for its shareholders.
TIME FOR (ANOTHER) CHANGE
Jes Staley was brought in due to his experience as chief executive of best in class investment bank JP Morgan. His arrival sparked hope of a revival of the Barclays division’s fortunes.
Regardless of industry challenges, Barclays investment banking arm continues to struggle versus peers. Many analysts see the unit as a weak link and barrier to share price recovery.
Neil Wilson, senior market analyst at ETX Capital says, ‘If Staley can’t make progress soon he might not last’.
Barclays is suffering its worst share price trading day since June 2016, according to City Index.
