Barclays results no longer impacted by last year’s over-issuance

Barclays has reported a group income of £6.3 billion (US$7.6 billion) for the third quarter of 2023 – down two percent year-on-year (YoY).

There was no impact from the over-issuance of securities issuance of securities this quarter - Anna Cross

Income for the corporate and investment bank (CIB) decreased six percent to £3.1 billion, driven by lower client activity in global markets, which was down 13% in dollars versus a record Q3 2022.

Fixed income, currencies, and commodities (FICC) fell 19% in dollars as the bank benefitted less from US rates volatility, compared to gilt volatility in the UK this time last year.

Equities was up three percent in dollars, with derivatives and cash performance partially offset by equity financing, as client balances continued to grow, albeit as spreads tightened.

The above figures are excluding the impact from last year’s over-issuance of securities (Q3 2022 financial impacts: equities income reduction of £466m, litigation and conduct reduction of £503m).

‘There was no impact from the over-issuance of securities issuance of securities this quarter but given the largely offsetting impact to income and costs in Q3 last year, I will again use the adjusted numbers for the prior year period,’ said Anna Cross (pictured), group finance director, speaking at the Q2 2023 results presentation on 24 October.

Group profit before tax was around £50 million lower at £1.9 billion, with income down two percent and costs down four percent YoY. Within total costs, operating costs were stable, and there were no litigation and conduct charges this quarter, compared to £164 million in Q3 last year.

As of 30 September 2023, the group’s Common Equity Tier 1 ratio was 14%, with risk weighted assets of £341.9 billion and tangible net asset value per share of 316p.

Structured products

Barclays was the issuer group behind 3,645 structured products worth an estimated US$5.4 billion in Q3 2023 – up 12% by sales volume YoY (Q3 2022: US$4.8 billion from 4,350 products).

The UK bank’s products were sold across 10 different jurisdictions, with the highest sales volumes seen in the US and Switzerland, followed at some distance by France, Japan, and the UK, according at SRP data.  

In the US market, where the impact of the over-issuance of securities last year was particularly felt – leading to the bank temporary suspending the sales of structured notes and ETNs in March and April 2022 – Barclays collected US$3.8 billion from 917 products, a 1.6-fold increase by sales volume YoY.

Barclays’ US offering was mostly linked to equities, with US$1.5 billion invested in 409 products linked to a basket of indices and a further US$1 billion tied into products linked to a single stock. The latter included the Synthetic Convertible Notes (06741W7A2) on the Class A common stock of Alphabet, which, with sales of US$450m, was the best-selling US product of the quarter.

In Switzerland, the bank gathered an estimated US$1.1 billion from 2,586 products (Q3 2022: US$1.5 billion from 3,172 products) that were mainly barrier reverse convertibles and autocalls linked to either a single share or a ‘worst-of’ basket of shares, with Amazon, Nvidia, Mercedes Benz, Richemont, and Tesla among the names that were frequently used.

In France, Barclays issued 14 products in the quarter while in Japan it was the bond provider for 14 products that sold just under US$200m (Q3 2022: US$220m, also from 14 products).

In its home market, the bank was the manufacturing company for 50 products worth around US$125m (Q3 2022: US$130m), including 39 linked to the FTSE 100. Barclays’ UK offering was available via four different distributors: MB Structured Investments (39), Causeway Securities (six), Idad (four), and Arcus Partners (one).

Q3 2023 YTD performance

For the first nine months of 2023, group income increased three percent to £19.8 billion, primarily driven by the net benefit from the higher interest rate environment, including continued structural hedge income, and higher balances in US cards, partially offset by the non-repeat of the prior year income from hedging arrangements related to the over-issuance of securities.

Global markets income decreased 18% to £6.1 billion while FICC income decreased 13% to £4.1 billion, driven by macro reflecting lower market volatility and client activity, partially offset by strong performance in credit.

Equities income decreased 28% to £1.9 billion driven by a decline in derivatives income reflecting less volatile equity market conditions. Excluding the impact from the over-issuance of securities, equities income decreased by 20%.

Click the link to read the full Barclays Q3 2023 results and the presentation.