Barclays profit rises 18% as bank raises key income target

Barclays reported a stronger third quarter than analysts expected and raised a key income target for 2024, giving investors a clearer read on how the bank is benefiting from its lending and deposit business.

The U.K. bank said pretax profit rose 18% to £2.23 billion in the quarter, according to MarketWatch. Analysts surveyed by Visible Alpha had expected pretax profit of £1.96 billion.

Pretax profit is profit before a company pays income taxes. For banks, it is a useful headline number because it captures earnings from lending, trading, fees and other operations before tax rates affect the final result.

Barclays also lifted its 2024 outlook for net interest income, excluding its investment bank and head office. The bank now expects that figure to be greater than £11 billion, compared with its previous target of £11 billion, MarketWatch reported.

Net interest income is the difference between what a bank earns on loans and securities and what it pays out on deposits and other funding. When interest rates are higher, banks can often earn more on loans, though the benefit depends on how much they must pay customers and investors for funding.

Why the guidance matters

For everyday investors watching bank stocks, the guidance raise is the main signal beyond the quarterly profit beat. A higher net interest income target suggests Barclays expects its core banking spread, the gap between lending income and funding costs, to hold up better than previously indicated in the parts of the business covered by the measure.

The exclusion of the investment bank and head office also matters. Barclays has a sizable markets and investment-banking operation, but this guidance focuses on other parts of the group, making it a more specific read on the bank’s interest-rate-sensitive businesses.

Barclays said it remains on track to meet its 2026 targets, according to MarketWatch. Those targets include a return on tangible equity of more than 12% and at least £10 billion of capital returns between 2024 and 2026.

Return on tangible equity measures profit against shareholder equity after stripping out intangible assets, such as goodwill. Banks use it to show how efficiently they are turning shareholder capital into earnings. Capital returns refer to money sent back to shareholders, commonly through dividends or share buybacks, though Barclays’ statement as reported did not break down the mix.

The bank also said the effect of regulatory changes on risk-weighted assets should land at the low end of its 5% to 10% view. Risk-weighted assets are a regulatory measure that adjusts a bank’s assets based on how risky regulators consider them. A lower increase can help a bank preserve flexibility because capital requirements are tied to those risk-weighted assets.

MarketWatch reported the figures from Barclays’ third-quarter update on Oct. 24, 2024.

This story draws on original reporting from MarketWatch.