Barclays announces bumper profits

Barclays has reported a strong third-quarter performance, with profits boosted by its UK retail division and lower-than-expected bad loan impairments.

Here are the key takeaways:

1. Group Pre-Tax Profits:
   • Up 18% year-on-year, reaching £2.2 billion, surpassing analysts' expectations of £2 billion.
2. Retail Division Performance:
   • Profits climbed over 20% to £924 million, exceeding the forecast of £729 million.
3. Loan Impairments:
   • Totalled £374 million, which is below the £452 million predicted by analysts.
4. Guidance Increase:
   • Barclays revised its full-year net interest income expectations (excluding investment banking) to over £11 billion, up from the earlier estimate of around £11 billion.
5. Investment Banking Division:
   • Pre-tax profits rose by 2% to £892 million, slightly below the forecast of £902 million.
6. Long-Term Strategy:

• • Under CEO C.S. Venkatakrishnan’s three-year plan, Barclays is shifting focus toward consumer and corporate businesses in the UK while aiming to reduce reliance on its investment bank.
• • The strategy includes returning £10 billion to investors by 2026 and achieving a return on tangible equity (RoTE) of more than 12%.

The bank is one of several that has recently started raising mortgage rates, following uncertainty in international markets over potential government borrowing in the upcoming Labour budget. Just last week Barclays announced a series of rate increases across its mortgage range, effective from October 18. These changes apply to both new purchases and remortgages, with most products experiencing a rise of 0.20 percentage points.

Residential Mortgage Rate Changes

For homebuyers, the new rates include:

• Two-year fixed rate at 60% LTV with a £899 product fee, increasing from 3.87% to 4.07%.
• Two-year fixed rate at 75% LTV with the same £899 fee, rising from 4.09% to 4.29%.
• Five-year fixed rate at 60% LTV with a £899 fee, increasing from 3.76% to 3.96%.
• Five-year fixed rate at 90% LTV with a £999 product fee, moving up from 4.34% to 4.54%.

Barclays is also adjusting the rates on its Green Home products, designed for energy-efficient properties. For example, the two-year fixed rate at 90% LTV will increase from 4.85% to 5.05%.

Remortgage Rate Adjustments

The changes extend to Barclays' remortgage products:

• Two-year fixed rate at 60% LTV with a £999 fee will increase from 3.96% to 4.16%.
• Five-year fixed rate at 85% LTV, also with a £999 fee, will rise from 4.75% to 4.95%.
• Products under the Great Escape remortgage range, which carry no product fees, are also affected. A five-year fixed rate at 60% LTV will climb from 4.04% to 4.24%.

High-Value Loan Adjustments

Barclays is raising rates for high-value loans, including those up to £10 million. For example, the five-year fixed rate at 60% LTV with a £1,999 product fee will move from 3.85% to 4.05%.

Market Context and Expert Insight

This latest round of increases follows Barclays’ recent decision to cut rates by as much as 0.50 percentage points on selected mortgage products. This rapid shift highlights the bank’s flexibility in adjusting to dynamic market conditions.

Nicholas Mendes, mortgage technical manager at John Charcol, suggested that the latest rate hikes are likely a strategic move aimed at managing service levels and balancing application volumes, rather than a direct response to changes in swap rates.

“With recent repricing by Santander and NatWest, Barclays and HSBC have seen a surge in applications,” Mendes explained. “Lenders have held off reacting to recent swap rate increases, but competitor pricing changes have created new pressures.”

He added that while inflation figures released this week brought some optimism, lenders are likely to hold steady on rates until the next budget announcement offers more clarity on the economic outlook.