Setbacks see Barclays swing to Q1 loss
● Bank’s £236m loss comes amid PPI charges and DOJ settlement
Barclays sank into the red in the first three months of this year as further payment protection insurance (PPI) charges and a £1.4 billion settlement with the US Department of Justice (DOJ) knocked profits.
The UK bank reported a pre-tax loss of £236 million for the first quarter, a turnaround from reported profits of £1.68bn in the same period last year. Stripped of litigation and conduct charges, Barclays’ underlying pre-tax profits rose 1 per cent to £1.7bn, while attributable profit came in at £1.2bn.
The bank was recently hit by a $2bn (£1.4bn) settlement reached with the US DOJ related to the sale of mortgagebacked securities in the leadup to the financial crisis.
Chief executive Jes Staley said: “While the penalty was substantial, this settlement represents a major milestone for Barclays, putting behind us a significant, decade-old legacy matter.”
Barclays booked an extra £400m to cover PPI charges after seeing a higher number of complaints over the quarter.
While the charges hit Barclays’ common equity tier one levels, Staley said he was confident in the lender’s position.
“This has been a significant quarter for Barclays, one in which we have shown that our new operating model and our portfolio of diversified, profitable businesses are capable of producing improved returns for shareholders.”
The PPI charges dragged on returns from its UK business, which suffered a 17 per cent fall in pre-tax profits to £581m, while its international business saw profits rise 4 per cent to £1.4bn. The bank’s total income for the first quarter fell 8 per cent to £5.3bn from £5.8bn last year.
Barclayssaidcurrencymovements were partly to blame, given the dollar’s depreciation against the stronger pound. It also hailed the launch of its ring-fenced bank, saying that along with its restructuring it was “well-positioned to deliver strong earnings going forward and remains confident of achieving its returns and cost targets.”
Speaking to reporters, Staley commented on draft warning notices issued by the Financial Conduct Authority and Prudential Regulation Authority over his attempt to identify a whistleblower in 2016.
Staley said: “I think broadly we are very comfortable with their findings and what we want to do is put this behind us and stay focused on managing the bank.” The size of the proposed penalty has not been disclosed, but Staley was given 28 days to respond to the warning notice.
He also confirmed that the bank was set to meet within weeks with activist investor Sherborne, run by Edward Bramson. Reports suggest Sherborne, which picked up a 5.16 per cent stake in the lender for £580m last month, is seeking higher returns from the investment bank and bigger payouts for shareholders.
Laith Khalaf, a senior analyst at Hargreaves Lansdown, said: “There’s a lot not to like about Barclays’ latest results, although many of the factors hampering the bank are oneoff items which don’t speak for the future prospects of the business.
“Stripping out these setbacks, performance has been a disappointment rather than a disaster, which the headline figures by themselves might suggest.”
“This has been a significant quarter for [us], one in which we have shown that our [strategies] are capable of producing improved returns”
CEO JES STALEY