Barclays profit falls as mortgage lending and investment bank squeezed

Barclays has reported lower profits for the start of the year, as mortgage lending and deposits dipped and its investment bank was squeezed amid prevailing economic uncertainty.

The high street banking giant reported a group pre-tax profit of £2.3bn for the first three months of the year, down 12% from the £2.6bn reported this time last year.

However, the latest quarterly earnings figure came in above analysts’ expectations of £2.2bn

Barclays said income from its UK operations fell 7% year on year, with it facing more subdued mortgage lending amid weaker demand in the market.

It comes after rival bank Lloyds said on Wednesday that its mortgage lending was lower over the first quarter, amid greater competition among UK lenders to offer customers better deals.

Barclays also saw customer deposits dip by 2% driven by lower customer account balances.

Barclays’ finance chief Anna Cross said this partially reflects “seasonal” factors including people paying credit card bills and tax bills at the start of the year.

“We see continued conservative behaviour as a financial matter, so they continue to seek higher savings rates and secure their mortgage financing early,” she said.

But Ms Cross said people moving money into accounts with higher returns is a trend that has “definitely slowed down” since the end of 2023.

Barclays also revealed that income from its investment bank fell 7% year on year, as a strong performance in the equities division was more than offset by lower activity in areas such as fixed income trading and deal-making by investment bankers.

Barclays group chief executive CS Venkatakrishnan said the bank was “focused on disciplined execution” of its cost-saving plan.

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

The overhaul also involves reducing its reliance on the weighty investment banking arm.

“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,” Mr Venkatakrishnan said.

Barclays said earlier this year it had clinched a deal to buy Tesco Bank’s retail banking operations for £600m where it will incorporate its credit cards, loans and savings.