Litigation and fines weigh on lender Barclays

Barclays is set to reveal a steep fall in annual profits on Thursday, adding to the banking giant’s headaches as it comes under pressure from an activist investor.

The lender is expected to report pre-tax profits of £2.94 billion, down 17% from £3.54bn in 2017, as it counts the cost of litigation and conduct charges, according to analysts at Morgan Stanley.

It comes as Barclays faces the threat of activist investor Edward Bramson muscling his way on to the board, ramping up calls for the lender to curtail its investment arm and increase returns for investors.

Mr Bramson’s investment vehicle Sherborne Investors – through which the New York-based investor has built a 5.5% stake – has submitted a resolution to Barclays to be considered at the annual general meeting on May 2 to appoint him to the board of directors.

The annual results also come amid the high-profile criminal trial against ex-Barclays boss John Varley and three of his former colleagues over emergency fundraising from Qatar at the height of the financial crisis.

The UK’s Serious Fraud Office (SFO) claims the four men secretly paid £322 million to Qatar in return for its investment in two capital calls, which allowed Barclays to escape a UK Government bailout in 2008.

Varley, Roger Jenkins, Richard Boath and Tom Kalaris all deny wrongdoing.

The bank’s results will show a hit from litigation and mis-selling costs, after this sent half-year profits slumping 29% to £1.7bn.

Its interims were knocked by further payment protection insurance (PPI) costs and a £1.4bn settlement with US authorities over its sale of mortgage-backed securities in the lead-up to the financial crisis.

But with these charges stripped out, analysts are expecting annual profits to rise 23% to £5.83bn.

The figures also follow a difficult earnings season for its Wall Street counterparts, which were knocked by turbulent markets and a sharp fall in bond and currency trading revenues over the final quarter of 2018.