Barclays Shares Decline Despite Profit Growth

barclays shares

British multinational and financial services company Barclays delivered its third-quarter earnings report on Thursday. The London-based company posted a growth of 32% in their quarterly earnings. This marks the company’s first earnings report since completing their restructuring post-financial crisis.

Their profits prior to taxes jumped from 837 million to 1.11 billion pounds or $1.47 billion pounds. However, this was below most estimates of 1.4 billion pounds for their pre-tax profits for the quarter.

Barclays has taken actions such as cutting assets and selling a number of its businesses which they weren’t able to place their sole attention in the past years is able to focus on their Britain and North America operations. It has also sold its African business as a part of this restructuring program.

Barclays also revealed on Thursday that its net income has risen by 41% to 583 million pounds while their net operating income inched down by 4% to 4.5 billion pounds due to the decline in the operations of their domestic retail and credit card operations.

Despite a mostly positive earnings, shares of the company declined as Barclays reported a 34% decline from its fixed income, currencies, and commodities(FICC) trading revenue. The decline in the FICC revenue of financial companies for the quarter was also attributed to the low volatility in the past couple of months that affected most financial companies.

Barclays slumped by as much as 4% during the early trading on Thursday and is down this year by 15%.

Barclay’s chief executive officer Jes Staley commented on the difficulty that the company faced during the third quarter especially with the markets business under Barclays International due to the lack of volume and volatility in FICC markets. However, he assured investors that he believes in being able to raise their return on equity to its maximum level in the past ten years as the investment bank continues to grow.

Staley also announced that it plans to propose a restructuring program to help the bank meet the regulatory rules that are required of British banks that receive more than 25 billion pounds of UK deposit section from their retail operations coming from riskier investment banks before 2019. “Barclays intends to satisfy this requirement by setting up a ring-fenced bank, Barclays Bank UK PLC, which will be separate from Barclays Bank PLC. The two entities will operate alongside, but independently from, one another as part of the Barclays Group under Barclays PLC,” added the bank.

Analysts were mostly disappointed by the earnings report primarily due to the numbers missing most estimates while they are in the middle of an issue by a possible billion dollar fine from the US Department of Justice regarding the sale of retail mortgage-backed securities back in 2008.

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