Barclays shares tank as full-year NIM guidance cut

Third-quarter headline profits at Barclays may have comfortably beaten analysts' forecasts, but the bank disappointed the market on Tuesday with a cut to its guidance for UK net interest margin (NIM), a key measure of profitability in retail banking.

The full-year Barclays UK NIM – the difference between interest income and the amount it pays back in interest on deposits – was revised to 3.05-3.10%, down from earlier guidance of 3.15-3.20%.

"Guidance is sensitive to the level and mix of deposit balances and further changes in expectations for interest rate," the company said.

The stock was down 7% at 134.02p by 0940 BST.

“Net interest margin is the metric the banks are judged on so it is not a surprise to see Barclays heavily punished for downgrading guidance here even if profit for the third quarter was ahead of guidance," AJ Bell head of financial analysis Danni Hewson.

“It’s never a particularly palatable message for shareholders to hear a business is going to be less profitable. While the banks were seen as beneficiaries of higher interest rates, and perhaps were for a time, the competitive and regulatory pressures to match increases in the cost of borrowing with rates offered for cash on deposits mean this benefit has not proved long lasting," Hewson said.

Barclays reported a pre-tax profit in the three months to 30 September of £1.89bn, down 2% year-on-year but well ahead of the consensus forecast of £1.77bn.

Total income for the quarter came to £6.26bn, down 2% on last year, as a decent performance from its international consumer, cards and payment division – up 9% at £1.36bn – was offset by a 6% fall in investment banking to £3.08bn.

Barclays' UK retail banking income meanwhile declined by 2% to £1.83bn, as improvements in business banking were offset by a slip in personal banking and sharp falls in the Barclaycard Consumer unit.

Group return on tangible equity was 11%, bringing year-to-date RoTE to 12.5%, while the common equity tier 1 (CET1) ratio improved to 14% from 13.5% at the half-year stage.