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During Q3 2020, Barclays managed to significantly reduce provisions for the loan losses thereby putting less budget for bad loan provisioning. Its corporate and investment banking (CIB) division shows strong performance during the tough times.
Earlier today, October 23, British banking giant Barclays plc (LSE: BARC) surprised the markets with stunning Q3 results. The bank reported a net profit of £611 million ($797.7 million) more than double the market expectations of £273.5 million.
The British lender has clearly laid its recovery plans from the Coronavirus pandemic. This strong performance comes on the backdrop of the significant reduction in COVID-19-related impairment charges. Also, during the third quarter, the bank’s provision for loan losses dropped significantly.
During Q2 2020, Barclays reported £1.6 billion of loan loss provisions. However, during Q3 2020, the bank has to accommodate just £608 million as bad loan provisions against the expected £1 billion. At press time, the Barclays stock is trading 4.58% up at 109.06 GBX on the London Stock Exchange. Speaking to CNBC, Barclays CEO Jes Staley said:
“In the first half of this year we took a very, very robust impairment charge and our impairment reserves, so our reserves for credit losses, is well north of £9 billion right now. That is the highest level of reserves that we have ever had, so we feel that we are very well situated in our balance sheet to deal with whatever economy we face in the latter part of this year and next year.”
Barclays’ Corporate and Investment Banking Division Does Well
As the COVID-19 economic crisis, big global banks have reported good performance of their respective investment baking divisions. Barclays now joins big institutions like UBS Group AG (NYSE: UBS) and JPMorgan Chase & Co (NYSE: JPM) with the robust performance of its corporate and investment banking division.
Barclays issued £100 million as part of the Community Aid Package distributed to different charities in the U.K. This contribution comes on the backdrop of strong performance for the bank’s corporate and investment banking (CIB) division. Staley said:
“This support is made partly possible because we have a resilient and diversified business model which means we remain profitable as we weather this crisis, with strong income performance in our CIB (corporate and investment bank) more than offsetting headwinds in our consumer businesses”.
However, over the last six months, Barclay’s CIB division has underwritten over $1 trillion in debt financing for corporations and governments. It looks that big banks and lenders have successfully managed to mitigate the impact of the economic crisis driven by COVD-19.