Barclays, one of the UK’s leading high street banks, has reported lower profits for the start of the year, citing a decrease in mortgage lending and deposits, as well as challenges faced by its investment bank in the midst of prevailing economic uncertainty. The bank reported a group pre-tax profit of £2.3 billion for the first three months of the year, down 12% from the £2.6 billion reported during the same period last year. Despite this decline, the latest quarterly earnings figure exceeded analysts’ expectations of £2.2 billion.
Income from Barclays’ UK operations fell by 7% year on year, with the bank attributing this decrease to subdued mortgage lending due to weaker demand in the market. This trend is consistent with what rival bank Lloyds reported earlier in the week, as they also experienced lower mortgage lending over the first quarter. Competition among UK lenders to offer customers better deals has intensified, leading to a decrease in customer deposits by 2% driven by lower customer account balances.
Barclays’ finance chief, Anna Cross, explained that the dip in customer deposits partially reflects seasonal factors such as people paying credit card bills and tax bills at the beginning of the year. She noted that customers continue to exhibit conservative behavior by seeking higher savings rates and securing mortgage financing early. However, Cross mentioned that the trend of moving money into accounts with higher returns has slowed down since the end of 2023.
In addition to challenges in its retail banking operations, Barclays also saw a 7% year-on-year decrease in income from its investment bank. While the equities division performed well, lower activity in areas such as fixed income trading and deal-making by investment bankers offset these gains. Barclays’ group chief executive, CS Venkatakrishnan, emphasized the bank’s focus on disciplined execution of its cost-saving plan, which aims to save approximately £1 billion this year and a total of £2 billion by 2026.
As part of its cost-saving efforts, Barclays is working to reduce its reliance on its investment banking arm. Venkatakrishnan announced the sale of the bank’s performing Italian mortgage book and highlighted investments in higher returning UK consumer businesses, including the expected completion of the Tesco Bank acquisition in the fourth quarter. Earlier this year, Barclays secured a deal to acquire Tesco Bank’s retail banking operations for £600 million, incorporating credit cards, loans, and savings into its portfolio.
In conclusion, Barclays’ lower profits for the start of the year reflect challenges faced in both its retail banking and investment banking operations. The bank remains focused on cost-saving initiatives and strategic investments to drive growth and profitability in the future.
