Barclays posted a pre-tax profit that fell 4% to £1.9bn in the third quarter as mortgage margin pressure and lower deposits outweighed higher interest rates.
The bank adds that group revenue was down 2% to £6.3bn from a year ago, as it faced “mortgage margin compression and lower current accounts deposit volumes consistent with wider market trends and cost-of-living pressures”.
However, it points out that UK sales rose 10% to £5.8bn, buoyed by Bank of England base rate charges that have lifted 14 times since December 2021 to 5.25%.
The business says gross mortgage lending hit £5.6bn in the third quarter, down from £7.8bn last year, but a slight gain on the £5.5bn of property loans in completed in the second quarter of this year.
There was a 14% rise in the amount of money put aside for potential defaults across the group, to £433m compared with £381m a year earlier. However, the cash put aside for defaults in its UK business fell by 27% in the third quarter.
The lender’s group net interest margin — the difference between what it charges to borrowers and what it pays out to savers – had been 3.15% over the nine months to the end of September.
However, it forecast net interest margin would fall to between 3.05% and 3.10% over the rest of its year.
AJ Bell head of financial analysis Danni Hewson says: “Net interest margin is the metric the banks are judged on so it is not a surprise to see Barclays heavily punished for downgrading guidance here even if profit for the third quarter was ahead of guidance.
“It’s never a particularly palatable message for shareholders to hear a business is going to be less profitable.
“While the banks were seen as beneficiaries of higher interest rates, and perhaps were for a time, the competitive and regulatory pressures to match increases in the cost of borrowing with rates offered for cash on deposits mean this benefit has not proved long lasting.”
Hargreaves Lansdown head of personal finance Sarah Coles adds: “Barclays said most of the 6% drop in deposits was from current accounts, and that it reflected broader market trends.
“It may mean there’s more of the same revealed when Lloyds and NatWest report later this week.”
Barclays group chief executive C. S. Venkatakrishnan points out that the bank’s results came “against a mixed market backdrop, as we continued to manage credit well, remained disciplined on costs and maintained a strong capital position”.
He added that the business would look for efficiencies in different parts of the bank in a conference call with reporters.
Barclays shares were down 6% to 135.4p in early afternoon trading.
Several major UK banks report results this week, including Lloyds Banking Group and Santander UK tomorrow, Standard Chartered on Thursday and NatWest on Friday.
