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Barclays: Trading statement
Barclays said full year earnings would be in line with market expectations but warned of rising bad debts in its trading update for the current year.
The bank said retail bad debt balances increased modestly in Q3 but credit card delinquencies increased at a higher rate. Credit card delinquencies are said to be in line with H1, not a comforting thought given that profits from this business declined significantly in H1 due to higher bad debts.
The banks says interest margins have remained broadly stable and in line with H1. We noted deterioration in margins in H1 compared to last year (48.3% v 50.7%). Operating expenses have increased in line with income growth due to a combination of investment in the global product businesses, performance related expenses, the expansion of International Retail and Commercial Banking and head office relocation costs.
Barclays Capital, the driver of growth in the recent past has reportedly turned in another strong performance on the back of higher client related activity and increasing contributions from credit products, commodities and the US businesses. Barclays Global Investors and wealth management services have also performed well due to increased assets under management.
Overseas, the bank has performed better driven by strong growth in the European mortgage businesses, African corporate lending and a good performance by the Spanish funds business.
The bank is clearly suffering from a slow down in UK consumer spending. While interest margins in H2 appear to have been maintained they are under pressure and rising costs and bad debts are a concern. Growth in the recent past has been driven largely by Barclays Capital, not high street banking meaning that future earnings a likely to be more volatile than some of its peers. The share trades at 595.5p, on a prospective PE (2005 earnings of) 11x, in line with the sector with a yield of 4.4%.
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