Barclays profits hit by subdued mortgage lending and lower customer deposits

• Barclays has reported lower profits for the start of the year 

Barclays has reported weaker profits for the start of the year, as mortgage lending and deposits slipped and its investment bank was squeezed by weaker corporate deal making.

The FTSE 100-listed lender said income from its UK operations fell 7 per cent year-on-year, amid subdued mortgage lending and ‘adverse deposit dynamics’.

Customer deposits slipped 2 per cent to £237.2billion, driven by lower customer account balances, which the bank said reflected broader consumer trends. 

The banking giant reported a group pre-tax profit of £2.3billion for the first three months of the year, down 12 per cent from the £2.6billion reported this time last year but slightly ahead of forecasts of £2.2billion.

Loans and advances to customers at amortised fell 1 per cent to £200.8billion, ‘reflecting subdued mortgage lending amid lower market demand and continued repayment of government scheme lending in Business Banking’. 

Barclays said income from its investment bank fell 7 per cent year-on-year, as a strong performance in the equities division was more than offset by lower activity in areas  like fixed income trading.

Total group income fell by 4 per cent to £7billion.  

CS Venkatakrishnan, the group’s chief executive, said the bank was ‘focused on disciplined execution’ of its cost-saving plan.

It plans to save around £1billion by making the bank more efficient this year, and is targeting about £2billion worth of savings in total by 2026.

Venkatakrishnan, said: ‘We have now announced the sale of our performing Italian mortgage book and are investing in our higher returning UK consumer businesses, including through the expected completion of the Tesco Bank acquisition in the fourth quarter.’

On Wednesday, Barclays also announced that its Irish unit, which houses much of its European business, would sell an Italian retail mortgage book in line with aims to simplify its exposures.

The deal will conclude in the second quarter of this year, generate a pre-tax loss of around £225million and be neutral to the bank’s capital levels, Barclays said.

The bank’s acquisition of Tesco Bank is expected to complete by the end of the year.

On the dividend front, Barclays said it planned to return at least £10billion of capital to shareholders between 2024 and 2026, through dividends and share buybacks, with a ‘continued preference for buybacks’. 

Credit impairment charges were £58m, consistent with ‘low delinquencies in UK cards, high quality mortgage lending portfolio and the improved macroeconomic outlook’, Barclays said. 

In February, Barclays said it would invest in its high-returning domestic banking business, as well as axing £2billion worth of costs and ramping up payouts to shareholders. 

Barclays shares were up 7.41 per cent or 14.16p to 205.30p on Thursday afternoon.

Richard Hunter, head of markets at Interactive Investor, said: ‘In terms of outlook, Barclays has maintained its guidance for the year, including ROTE in excess of 10 per cent, Net Interest Income of £10.7billion and a cost/income ratio of 63 per cent.

‘Further out, the group is anticipating larger shareholder returns which are likely to be skewed towards share buybacks, thus providing some share price support. In the meantime a dividend yield of 4.2 per cent provides another level of return for investors in addition to the capital returns more recently experienced.

‘Indeed, the shares have risen by 24 per cent over the last year, compared to a gain of 1.9 per cent for the wider FTSE 100, including a strong rally of 42 per cent over the last six months. 

‘The initial share price reaction to the numbers has also been positive and, with Barclays being a group with deep pockets and a diversified business model, the longer-term outlook remains one which continues to attract investors. As such, the market consensus of the shares as a buy is most likely to remain intact.’