Barclays warns of tough times ahead despite beating profit expectations

The bank's chief executive, Jes Staley, said: “In this historically challenging year for our customers and clients we have continued to provide huge support to help people through the social and economic impact of the Covid-19 pandemic.

"This remains a priority, alongside maintaining the financial integrity of the firm and keeping our colleagues safe.”

Barclays reported stronger than expected third quarter earnings, as its consumer businesses swung back to profit and bad loan provisions fell, but the bank also warned of a deteriorating economic outlook.

Barclays is the first major British bank to report third quarter earnings, with analysts and investors watching closely for signs of the expected wave of bad loans linked to the pandemic.

The bank reported a pre-tax profit of £1.1bn for the July to September period, double the £507m average of analysts’ forecasts.

It booked credit impairment and provision charges for the quarter of £608m, well below the £1bn analysts had expected.

Income rose 3 per cent in the nine months to the end of September to £16.8bn with a pre-tax profit of £2.4bn.

Profits increased in both its investment division and high street lending one over the July to September period, as global economies recovered from the height of the global pandemic.

Barclays saw an increase in its preferred measure – Return on Tangible Equity (RoTE), which is based on profits from cash invested with the bank – which increased to 5.1 per cent in the three months to September 30.

The increase was greater in its investment division – hitting 10.2 per cent – compared with its ring fenced high street services, with saw a more modest 4.5 per cent increase. The UK division made a pre-tax profit of £196m.

Barclays said it is considering further cost cutting measures, which could result in fresh charges.

The bank, which in common with its peers, has halted dividend payments at the request of Britain’s prudential regulators, said it will update on its payout policy when it reports full year results.

Barclays has set aside billions of pounds worth of provisions against loans expected to go bad as the economic downturn from the Covid-19 pandemic hits borrowers.

Despite its strong third-quarter, Barclays downgraded its baseline economic forecast for the UK this year amid a sweep of local lockdowns to control the spread of Covid-19.

The bank now expects the UK’s GDP to fall 10.3 per cent this year, but it said there has been no significant rise in bad loans so far due to Government financial support for jobs and companies.