Barclays’ profits decrease by 12% due to slow mortgage demand

Barclays Reports 12% Decrease in First Quarter Profits Due to Drop in Mortgage Lending and Deposits

Barclays, one of the UK’s largest high street banks, has announced a 12% decline in profits for the first three months of the year. The company reported a group pre-tax profit of £2.3bn, down from £2.6bn during the same period last year.

Although this figure was slightly higher than analysts’ expectations of £2.2bn, it was a significant decrease from the previous year. The news caused Barclays’ shares to rise by more than 4% in early trading on Thursday.

The decrease in profits was attributed to a decline in income from the bank’s UK operations, which fell by 7% year-on-year. This was mainly due to subdued mortgage lending and a 2% decrease in customer deposits.

Speaking about the results, Barclays’ finance chief Anna Cross noted that they were influenced by “seasonal” factors, such as customers paying off credit card and tax bills at the start of the year. She also mentioned that customers were displaying “conservative behavior” by seeking higher savings rates and securing mortgage financing early.

However, Ms. Cross stated that this trend of customers moving money into accounts with higher returns has slowed down since the end of 2020.

In terms of cost-saving plans, Barclays’ group chief executive CS Venkatakrishnan emphasized the bank’s focus on “disciplined execution.” This includes implementing around £1bn in efficiency cuts this year and a total of approximately £2bn in savings by 2026. The bank also plans to reduce its reliance on its investment banking arm and sell its Italian retail mortgage book in the second quarter of this year.

Analysts, however, have expressed concerns about the bank’s saving targets and believe that more job cuts may be necessary to achieve them. Last year, Barclays cut 900 roles in the UK as part of a restructuring before Christmas, as reported by Unite.

In February, the bank also announced a deal to purchase most of Tesco’s banking arm for up to £1bn. This move is expected to further strengthen Barclays’ position in the UK retail banking market.

Overall, Barclays remains committed to its cost-saving plans and is determined to navigate through the challenges posed by the current economic climate.