On Thursday, October 24, Barclays Bank $Barclays (BCS.US)$ released its third-quarter financial report, which exceeded market expectations in the third quarter. The growth in pre-tax profit and revenue was mainly due to the rebound in investment banking activities and the continued benefits of high interest rates.

At the same time, the slower-than-expected rate cut and optimistic investment banking outlook helped raise this year's revenue outlook.

Investment banking business made a significant contribution.

Specifically, in the three months ending September 30, pre-tax profit reached 2.23 billion British pounds (approximately 2.88 billion US dollars), an 18% year-on-year increase, exceeding the market's expected 1.97 billion British pounds. At the same time, group revenue increased by 5% year-on-year to 6.55 billion British pounds, higher than the expected 6.46 billion British pounds.

As a key development area for Barclays Bank, the investment banking business has a significant influence in the US market. Due to the restart of trading activities and increased stock market volatility, investment banking business costs increased, contributing 2.67 billion British pounds in revenue to the group, a 6% year-on-year increase.

This growth was mainly driven by stock trading and new trading activities, raising this year's expenses and underwriting income. Barclays Bank's performance is in line with its Wall Street competitors, with global stock market volatility boosting investment banking business.

Barclays Bank's net interest income (NII), the difference between the income the bank receives from loans and the deposits paid to customers, was 2.81 billion British pounds, a year-on-year increase of 1.7%. This growth is primarily driven by its domestic business, Barclays UK.

To mitigate the impact of the Bank of England's rate cuts, Barclays Bank has implemented structural hedges, which continue to provide momentum. The Bank of England announced its first rate cut since 2020 in August, while Barclays Bank now predicts that this year's net interest income will exceed the previous target of 11 billion British pounds.

In terms of lending activities, Barclays Bank's overall lending activities are encouraging, reflecting a focus on growth in the United Kingdom.

Finance director Anna Cross stated during a media conference call that the rebound in mortgage lending and the strong acquisition volume of UK cards are behind the cost reduction.

Barclays Bank's impairment level is lower than expected, with a loan loss rate of 37 basis points. The lower delinquency rate of UK cards, high-quality mortgage loans, and better macroeconomic prospects are reasons for cost reduction.

As of the latest update, Barclays Bank's pre-market trading on US stocks is up over 4%, with a year-to-date increase of over 57%. Analysts point out that its diversified model supports a series of solid performances.

Barclays Bank maintains most of its targets unchanged, still aiming to achieve a tangible return on equity of over 10% by 2024 after announcing 12.3% in the third quarter.

The company also stated that it expects to complete the acquisition of Tesco Bank on November 1st, with the gains offsetting losses from the sale of its Italian retail mortgage portfolio and German consumer finance business, resulting in a broadly neutral impact on this year's tangible return on equity.

Acquiring Tesco Bank and advancing global strategy reforms.

Barclays' domestic corporate and consumer loan business performed well again, acquiring Tesco's banking division for 0.6 billion british pounds. Stock fundraising income was 64 million british pounds, an increase of 3% year-on-year, but nearly half of the revenue was reported in the second quarter of 2024.

However, the performance of this investment bank lags behind some American and European competitors. Cross stated in an interview with Reuters that she believes Barclays performs well compared to American counterparts, but the impact of reporting dollar income in british pounds makes Barclays' performance seem relatively poor compared to Wall Street peers.

Meanwhile, Barclays executives earlier this month stated that the bank had undergone significant restructuring in its industry coverage and employee investments before making progress in the consultancy business.

The bank announced its largest reform since 2016 in February to boost investor confidence and expressed plans to further advance domestic lending while reducing financial resources consumed by its investment banking relative to other businesses.

It is worth noting that several other banks have also announced plans to restructure, simplify operations, and cut costs as they may face a narrowing net interest margin due to declining interest rates. HSBC stated earlier this week that it will integrate its operations into four business divisions.

Additionally, Barclays has revised its expectations for the pace of interest rate cuts, now estimating that the Bank of England will cut rates three times this year, whereas the previous view was five rate cuts.

Editor/rice