Barclays have warned that they face making cost cuts as a direct result of the economic impact of the Coronavirus pandemic as their bad debt provisions are pushed to £4.3 billion.
The bank beat profit forecasts for the third quarter of 2020 however have put aside a further £608 million to help cover a potential surge in customer defaults over the coming months.
Barclays total credit impairment charges for the nine months of 2020 to September stands at £4.3 billion and earlier this year a spokesperson for the banking giant said they could be forced to put away up to £4.5 billion this year to cover bad debts.
The lender has revealed that they still face a future of cost cuts, which is likely to come in the form of reducing physical office space. Currently it’s thought the bank has around 55,000 of its 85,000 staff working from home and has been housing call centre staff in branch stores as opposed to their usual large offices.
Finance Director at Barclays, Tushar Morzaria, explained how the pandemic had changed the way their staff worked, “We’ve learned a lot through the Covid pandemic … We have some very large offices in different parts of the country that, you know, we’re not sure how they’ll be utilised prospectively. We haven’t made any decisions on this – I think these are very long-term issues, and we want to be thoughtful and deliberate,” he said.
Despite the prospect of cutting costs, the bank reported pre-tax profits for the three months to September of £1.1 billion which was considerably above predictions of £507 million. The profits were also three times the figure for the same period last year when Barclays had to take a £1.4 billion charge linked to payment protection insurance mis-selling claims.
Whilst Barclays net interest margin (the difference between what it earns in loans and pays for deposits) remained at a steady 2.51% however the Bank of England has already warned lenders nationwide that they must prepare for negative interest rates, after already slashing rates to a record low of 0.1% in March.
Barclays Chief Executive Jes Staley, said the firm would not be able to rule out branch closures in the coming months but claimed the decision would be down to usage, with more customers choosing to bank digitally and online.
“We are not making any branch decisions as a result of the Covid-19 pandemic. We’re continuing the process of rationalising our physical footprint based on what our customers want,” he said.
Staley also confirmed he would stay on at the banking giant for a few more years as Chief Executive and that after being at the reigns through Brexit and the Coronavirus pandemic that it would be “nice to be here through more kinder winds”.