Barclays profits soar, but weighed down by DoJ fine

Barclays Group (LON:BARC) profits before tax increase 23% to £5.3 billion in the third quarter (Q3), with its investment bank business performing particularly well, as equity trading revenues went up 25% from the same period last year to £471 million.

Barclays Group CEO Jes Staley commended the efforts of its corporate and investment bank for outperforming peers like Goldman Sachs (NYSE:GS) and JPMorgan (NYSE:JPM), with the bank advising on ‘three of the largest M&A transactions executed in the period’.

The strength that Barclays investment bank business pours a little water on the proposal by activist investor Edward Bramson to shrink the unit.

Barclays profits hurt by fines

But, despite a strong performance, Barclays profits were dented by misconduct charges of £2.1 billion, including a £1.4 billion settlement with the US Department of Justice in relation to the bank’s mortgage practices and a $400 million charge due to Payment Protection Insurance (PPI) in the first quarter of this year.

Factoring in these fines, brings the bank’s Q3 profits to £3.1 billion, down from 3.45 billion in the same period last year.

Barclays looks brighter

Overall, the bank has posted a strong performance to generate what translates into a major increase in profits, with Barclays outperforming market analysts expectations. Barclays Group saw net profit in Q3 of £1 billion, nearly double from the £583 million is published a year prior.

The results are all the more impressive, considering the bank has undergone a £1 billion ring-fencing plan to split its retail and investment banking divisions, as well as pressure from activist Sherbourne and a myriad of economic headwinds.

‘In spite of macro-economic uncertainty, and particularly concerns over Brexit which weigh heavily on market sentiment, 2018 is proving to be a year of delivery on our strategy at Barclays,’ Staley said.

‘We remain focussed on generating improved returns, and on distributing a greater proportion of excess capital to shareholders over time,’ he added.