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Barclays warned of potential cost cuts as the economic fallout from the Covid-19 pandemic pushed its total bad debt provisions to £ 4.3bn.
The lender has set aside another £ 608 million to help cover a possible increase in customer defaults. It came when Barclays beat its earnings forecast for the third quarter of 2020.
While this latest increase was less than the £ 1bn forecast by analysts, it brings Barclays total credit impairment charges to £ 4.3bn for the nine months through September. Earlier this year, a bank spokesperson confirmed that Barclays could be forced to save up to £ 4.5bn to cover bad debts.
Barclays said impairment charges for the second half of 2020 would be “substantially below” levels recorded in the first half of the year and that costs would be virtually flat.
However, the UK bank warned of further cost cuts in the future: “The group will evaluate actions to reduce structural costs, which could result in additional charges, the timing and size of which have yet to be determined. “.
Barclays reported £ 1.1 billion in pre-tax earnings for the three months to September, easily beating analyst forecasts of £ 507 million.
It was also three times higher than the £ 246 million reported during the same period last year, when Barclays was forced to take a £ 1.4 billion charge linked to claims for the improper sale of payment protection insurance.
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The bank’s net interest margin, which measures the difference between what it earns on loans and what it pays on deposits, remained stable at 2.51%. However, the Bank of England warned banks to brace for negative interest rates as it slashed them to record lows of 0.1% in March.
Barclays warned there would be more “income headwinds” in the UK, where it expects low interest rates to continue into 2021.
Barclays is the first major UK bank to report third quarter earnings, followed by HSBC, Lloyds and NatWest Group next week.
Barclays shares rose nearly 4% in early trading, to the top of the FTSE 100.
