October 24, 2018 / 6:15 AM / 24 days ago

Barclays beats profit forecasts despite investment bank costs

LONDON (Reuters) - Britain’s Barclays (BARC.L) beat third quarter profit forecasts on Wednesday and reported higher revenues at its under-pressure investment bank, although its costs rose.

FILE PHOTO: Barclays' logo is seen on top of one of its branches in Madrid, Spain in this March 22, 2016 photo. REUTERS/Sergio Perez/File Photo

The results gave Barclays’ shares an initial lift after it reported a profit before tax of 1.6 billion pounds, excluding litigation and conduct costs, above the 1.33 billion pounds expected by analysts polled by the bank.

“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,” its chief executive Jes Staley said.

The bank’s shares were up 0.7 percent by 0747 GMT, outperforming the STOXX European banks index .SX7P which was down by 0.5 percent.

The profit excluded costs from litigation and fines for misconduct, which have blighted Barclays in recent years as it paid out for misdeeds during and after the financial crisis.

Barclays group profits for the first nine months of 2018 fell in comparison with the same period last year, as it booked a 1.4 billion pound settlement with the U.S. Department of Justice over mis-selling mortgage backed securities.

Since taking over as CEO, Staley has pushed an investment banking-led strategy that has drawn criticism from some shareholders and been the target of a campaign by activist investor Edward Bramson.

While the transatlantic consumer and wholesale lender saw income in its market trading business rise by 19 percent in the third quarter, this came at a cost.

The cost-income ratio for Barclays International rose to 69 percent from 62 percent in the first quarter. Barclays is targeting a ratio of below 60 percent at group level over time.

Meanwhile, the unit’s return on tangible equity was 7 percent, compared with 19.9 percent in Barclays cards and payments business and 22 percent for Barclays UK.

The bank also said it will redeem $2.65 bln worth of preference shares, in a move it said would reduce its annual funding costs by 165 million pounds a year.

Barclays reported a better than expected core capital ratio of 13.2 percent at the end of the third quarter. This had been depleted by fines and misconduct costs in recent years and was a further source of concern for investors.

Barclays in August signalled confidence in capital levels by announcing a better than expected interim dividend.

The bank reiterated it was on track to pay a dividend of 6.5 pence per share for 2018.

Barclays also said the Irish central bank had given it permission to expand its Irish operations, as it transfers the ownership of all of its European branches to the entity ahead of Brexit on March 29.

Reporting by Lawrence White and Emma Rumney, editing by Sinead Cruise and Alexander Smith

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