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A rise in borrowing costs for mortgage and loan customers has helped Barclays increase key revenues by almost 60%, pushing its latest quarterly profits higher to £2bn.
The UK bank, which had been expected to reveal a slight dip in earnings, said pre-tax profits instead rose 6% in the three months to the end of September.
That was about £200m higher than the £1.8bn that analysts had forecast, and compares with £1.9bn during the same period last year.
The results were supported by an increase in net interest income, which is the difference between what a bank charges for loans and what it pays in interest on deposits. The key revenue stream jumped to £3bn in the third quarter, up 58% from £1.9bn a year earlier.
It follows an increase in interest rates, including in the UK, where the Bank of England has raised rates from all-time lows of 0.1% last year to 2.25%, to help tackle inflation, which soared to 10.1% in September. The move, along with recent market volatility, has caused banks to raise borrowing costs for loan and mortgage customers.
Higher income helped offset the £381m Barclays put aside to deal with potential defaults, as it prepared itself for the fact that some customers hit by the cost of living crisis could struggle to pay their – in some cases more costly – debts.
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The provision for potential defaults was higher than the £330m expected by analysts, and is more than three times the £120m it put aside for bad loans last autumn.
Barclays stressed that the number of people falling behind on debts “remained below historical levels”, explaining that the increased provision was the result of a “deteriorating macroeconomic forecast”.
Its chief executive, CS Venkatakrishnan, said the bank had achieved “strong returns” but was ready to support customers as soaring interest rates and inflation squeezed their finances.
“We are ready to provide support for customers and clients facing an uncertain economic environment and higher cost pressures. Whether helping retail customers to manage their finances or corporate clients navigate markets volatility, we will continue to be focused on meeting their needs.”
