The British economy is still not “out of the woods”, according to Barclays’ chief executive, who said the bank would remain cautious in the months ahead despite making its strongest quarterly profit since 2011.
CS Venkatakrishnan said: “The macro-economic outlook around the world – not only the UK or in the US – is a little better today than it was six months ago. That doesn’t mean they’re out of the woods.”
“I mean, inflation is falling … growth is flattish, it’s better than we thought it would be. But it’s still not back to what we would consider we’d need to see for a ‘soft landing’. And so I think that that requires us to be a little cautious because the rates rising cycle is not complete,” he told reporters on a call discussing the bank’s January to March results.
The Bank of England has raised interest rates 11 months in a row to 4.25%, and is expected to do so again on 11 May. The increases have been part of efforts to curb surging prices, which rose sharply after a jump in energy costs linked to Russia’s full-scale invasion of Ukraine.
And while higher rates boost profits for high street banks such as Barclays – since they can charge customers more for loans and mortgages – uncertainty over the long-term impact on consumer spending and deal making is a concern for such lenders.
Venkatakrishnan said widespread panic over the health of the banking sector last month – prompted by the collapse of Silicon Valley Bank and takeover of Credit Suisse by rival UBS – was also adding to the gloom. “That’s been very specific to the institutions involved, but it does cast a bit of a shadow over the rest of the sector. It has calmed down a lot, but it’s not completely disappeared,” he said.
His remarks came as Barclays reported a better-than-expected 16% rise in first-quarter profit to £2.6bn, the bank’s largest since account standards changed in 2011. Barclays benefited from higher interest rates, which helped offset a weak performance from its investment arm and a rise in the money put aside for potential defaults – primarily for US credit card customers – to £524m.
The bank is still facing questions over how it scrutinised its former chief executive Jes Staley, who is being sued by his former employer JP Morgan over his alleged ties to the convicted sex offender Jeffrey Epstein.
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Venkatakrishnan said that while the allegations were “serious”, Barclays was not party to the court cases and, therefore, was in “no position to comment”. Staley’s lawyers have previously said the allegations were “baseless”.
