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Barclays is set to reveal a rise in profits next week driven by a buoyant investment banking division and the release of bad loan provisions set aside due to the Covid-19 pandemic.
The bank set aside £3.7 billion as a rainy day fund last year and released £742 million earlier this year. Investors will be looking to see how much more will be released on Thursday as the economy recovers.
Bosses revealed a strong profit rebound when they updated the City on the first six months of the year in July, recording pre-tax profits of £5 billion against just £1.3 billion in the same period in 2020.
Analysts are expecting the group to post profits of £1.6 billion in the three months to October against £1.1 billion made a year ago.
Between July and October last year, the bank took further bad loan provisions of £608 million to cover itself from any Covid-19 losses.
The City is expecting the release of these funds to provide a boost to profits for the same period this year, although how much remains uncertain.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “Last year, the group put aside swathes of money in case customers defaulted on payments, but these provisions are being unwound – which helped profits substantially in the first half.
“It’s a short-term tailwind, but one which we think will have continued into this quarter.”
But she warned that low interest rates will continue to drag on the profitability of Barclays’ loans.
Russ Mould and Danni Hewson, financial analysts at AJ Bell, said the performance of the investment bank would also be scrutinised closely by analysts and investors.
They said: “The unit had a good first half, generating £3.4 billion of pre-tax profit against £2.2 billion in the prior period in 2020, helped by active bond and equity markets, plenty of primary and secondary equity market activity and a good dollop of mergers and acquisitions on top.”
Analysts expect the division to post profits of £1.8 billion for the period between July and October.
The pair also said that shareholders will be looking for any update on when Barclays’ chief executive may stand down after churn in the management team in the last year.
They said: “There have been hints that boss Jes Staley may leave by the end of 2021, especially after a reshuffle of management heads at this time a year ago.”