Barclays swung to a statuary loss before tax in the third quarter, but the adjusted bottom line - a better measure of its underlying performance - saw strong growth when excluding the 1.8bn pounds in own credit charges and compensation for mis-sold Payment Protection Insurance (PPI).
On an adjusted basis, pre-tax profit totalled £1.73bn in the three months to September 30th, pretty much flat quarter-on-quarter but well ahead of the £1.34bn reported in the third quarter last year. This was broadly in line with analysts' forecasts for £1.71bn.
Shares fell 2.72% to 232.3p in early trading on Wednesday.
So far this year, the company has taken £1bn in provision for PPI redress, £700m of which was realised in the third quarter. The firm also took a charge of £1.07bn on its own credit, during the three-month period, compared with £263m in the third quarter of 2011.
On a statutory basis, which includes these 'one-offs', the firm registered a loss before tax of £47m, compared with a profit of £813m the year before. "Adjusted results provide a more consistent basis for comparing business performance between periods," Barclays explained.
Adjusted profit before tax for the first nine months of the year is now up 18% at £5.95m, from £5.06bn in the same year-ago period.
Adjusted income net of insurance claims was £6.87bn in the third quarter, down from £7.0bn the year before. However, after taking into account credit impairment charges and other provisions, the statutory net operating income improveed from £5.98bn to £6.05bn. Nine-month adjusted income was flat year-on-year at £22.35bn.
The company said that it was able to reduce its sovereign exposures to Spain, Italy , Portugal, Ireland, Greece and Cyprus by 15% during the third quarter to £4.8bn.
The Core Tier-1 capital ratio improved from 10.9% at the end of the first half to 11.2%. "Risk weighted assets reduced 3% to £379bn, principally reflecting risk reduction in Corporate and Investment Banking and foreign exchange
movements, partially offset by a change in methodology on loss given default for sovereign exposures".
"Legal and regulatory matters"
Following on the PPI and interest rate swap mis-selling issues that have damaged the bank's reputation over the last two years (along with other UK lenders), the bank has been hit by further regulatory matters since the first half.
The company said that it had been informed by the US Department of Justice (DOJ) and US Securities and Exchange Commission (SEC) that they are undertaking an investigation into whether Barclays' relationships with third parties who assist the bank to win or retain business are compliant with the United States Foreign Corrupt Practices Act.
Meanwhile, the US Federal Energy Regulatory Commission (FERC) Office of Enforcement (FERC Staff) has been investigating Barclays power trading in the western US with respect to the period from late 2006 through 2008.
Good momentum but cautious outlook
Commenting on the resuts, Chief Executive Antony Jenkins said: "These results demonstrate that we continue to have good momentum in our businesses despite the difficulties we faced through this period. While we have much to do to restore trust among stakeholders, our universal banking franchise remains strong and well positioned.
"[...] We look forward to closing out 2012 in a strong position, and to sharing more with you in February 2013 about how we intend to make Barclays the 'Go-To' bank for all of our stakeholders," he said.
As for the bank's outlook, it said:: "Performance during October continues to be affected by the challenging economic environment and subdued market volumes.
"We continue to be cautious about the environment in which we operate and have positioned the Bank accordingly with an intense focus on costs, returns and capital. We remain confident in the strength of our market positions, our robust risk management and the benefits of our universal banking model."
This is what analysts at Credit Suisse are telling clients about the results: "Numbers were in line with consensus but slightly weaker than Credit Suisse estimates. The investment bank was weaker, partially offset by other divisions and a narrower loss in corporate centre. We expect the stock to be weaker, having been strong on restructuring expectations. Trading on 0.6 times for a Return on Tangible Equity between 7-8%, we remain Neutral.
"Cautious outlook statement pointing to (...) The group reiterated commitment to a universal banking model. We note in the legal section the bank comments there could be a release by the FERC."