Barclays UK has pointed to the growth in its mortgage loan book as a factor behind its sharp increase in profitability, however its net interest margin has been hit by the ongoing price competition.
The bank’s UK division reported profit before tax of £600m for the first quarter of 2019, up from £200m in the same quarter last year.
This was despite its income dropping by 1 per cent, with the bank suggesting that pressure on margins was offset by “sustainable growth in mortgages and deposits”.
Barclays mortgage book has grown in size from £134.4bn in the second quarter of 2018 to £136.5bn in the final quarter of last year, the most recent figures it has published.
Meanwhile its average loan to value (LTV) has dropped from 49.6 per cent to 48.9 per cent, with the lender saying it remains focused on increasing the size of that loan book “within [our] conservative risk appetite”.
Buy to let represents a very small segment of Barclays’ lending, accounting for 12.5 per cent of its loan book.
Mortgage competition hitting
Barclays said that its net interest margin had dropped by 2bps during the quarter to 3.18 per cent, which was down from 3.27 per cent in the first quarter of last year.
It said this was due to “continuing pressure on mortgage margins” as well as the result of focusing more on growing its secured, rather than unsecured, lending.
Barclays noted that it had reduced mortgage origination in the final quarter of 2018, but that application volumes had “rebounded” in the first quarter of this year.
Across the group, results were less favourable though, with its underlying earnings down year-on-year, a result it blamed on its struggling investment division.