Barclays profits up 23% on investment banking gains; Goldman, Apple fined $89mn for credit card mishandling

Barclays reported a 23 per cent increase in third-quarter profits to £1.6bn on Thursday, exceeding analysts’ expectations of £1.3bn. 

The bank benefited from higher interest rates and a recovery in dealmaking. Net interest income reached £1.7bn, beating the £1.6bn forecast, with full-year guidance raised to over £11bn. Its UK domestic bank’s net interest income outlook also increased to £6.5bn.

Barclays’ investment bank saw a 6 per cent income rise to £2.9bn, driven by equities trading and renewed M&A activity. Investment banking fees and underwriting income surged 58 per cent, mainly due to debt capital markets fees. Equities and fixed income trading revenue rose 3 per cent to £675mn and £1.15bn, respectively.

Chief executive CS Venkatakrishnan noted that recovery in M&A dealmaking is expected to continue, though US election outcomes could impact markets.

“We have to see who comes in. We have to see what economic officials and trade officials they put in and what their policies are, and that can obviously add some volatility,” he said.

In its UK retail banking division, Barclays allocated £82mn for potential bad loans, a significant reduction from the £267mn set aside during the same period last year. The decrease reflects “low delinquencies in UK cards, a high-quality mortgage lending portfolio, and an improved macroeconomic outlook”, the bank said.

Barclays also confirmed that its acquisition of the majority of Tesco Bank’s assets will be finalised in November. The Tesco acquisition, along with the sales of its German and Italian retail loan books earlier this year, is expected to strengthen the bank’s capital position.

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The US Consumer Financial Protection Bureau has fined Goldman Sachs and Apple over $89mn for mishandling their joint credit card business. 

In a statement on Wednesday, the CFPB accused the two companies of “illegally sidestepping” obligations, including failing to process disputed transactions and misleading customers about interest-free payment plans for Apple products.

Goldman was fined $45mn and ordered to pay $19.8mn in customer compensation, while Apple will pay $25mn. Goldman now faces restrictions on issuing new credit cards unless it can prove compliance with consumer protection laws.

CFPB director Rohit Chopra said the misconduct caused “real harm to real people”, leading to wrongful charges and damaged credit reports. 

In a statement, Goldman said it was pleased to have resolved the matter: “We worked diligently to address certain technological and operational challenges that we experienced after launch and have already handled them with impacted customers.”

Apple said it “strongly” disagreed with the CFPB’s description of its conduct but reached an agreement with the regulator. “Upon learning about these inadvertent issues years ago, Apple worked closely with Goldman Sachs to quickly address them and help impacted customers,” a spokesperson said.

Goldman is currently winding down its Apple Card partnership and exiting the consumer business entirely after losses exceeding $6bn. Apple is reportedly in talks with JPMorgan to take over the credit card partnership, but no timeline has been set.

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Erik Thedeen, chair of the Basel Committee on Banking Supervision, has called on regulators to swiftly implement the ‘Basel III Endgame’ capital rules, which aim to bolster banks’ risk management by increasing capital reserves. 

Speaking at the Institute of International Finance Annual Membership Meeting in Washington on Wednesday, Thedeen criticised lobbying efforts from banks in the US, UK and EU, which claim that additional capital requirements are unnecessary and will curb lending and hurt the economy.

Thedeen dismissed these arguments, stating: “Shaving off a few basis points of capital will not unlock a wave of new lending, but it will weaken your resilience.”

“As with other areas of economic policymaking, any perceived short-term gains are usually more than offset by longer-term pain,” he added. 

He also urged nations to avoid a “free-for-all” of differing policies, stating, ”We may have different opinions about Basel III, but I think we can all agree that having a globally consistent level playing field is preferable to a patchwork of disparate regulations.”

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Italy’s Intesa Sanpaolo announced plans on Wednesday to cut nearly 10 per cent of its workforce, totalling 9,000 voluntary job cuts over the next three years, including 4,000 early retirements. 

The cuts, which aim to reduce costs and accelerate the bank’s digital transformation strategy, are intended to save €500mn annually by 2028. 

The bank said it would book €350mn in charges in the fourth quarter for the redundancy programme, but confirmed the provisions will not impact its €8.5bn net income target for 2024. 

The restructuring is part of Intesa’s 2022-25 business plan, which focuses on streamlining processes and expanding digital services. Intesa said it also plans to hire 3,500 young professionals by 2028 to boost sales within its wealth management and insurance businesses.