Barclays swings to first-quarter loss as US settlement and PPI hit profits
Stripped of litigation and conduct charges, the bank said attributable profit was nearly £1.2 billion.
Barclays swung to a loss in the first quarter as further payment protection insurance (PPI) charges and a £1.4 billion settlement with the US Department of Justice knocked profits.
The UK bank reported a pre-tax loss of £236 million for the three months to March 31, having reported profits of £1.68 billion in the same period last year.
Stripped of litigation and conduct charges, Barclays said its attributable profit was £1.2 billion.
The bank was hit by a 2 billion US dollar (£1.4 billion) settlement reached with the US Department of Justice (DOJ) earlier this month, related to the sale of mortgage-backed securities in the lead-up to the financial crisis.
Our new operating model and our portfolio of diversified, profitable businesses are capable of producing improved returns for shareholders Jes Staley
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 £400 million to cover PPI charges after seeing a higher number of complaints over the quarter.
While the charges affected Barclays’ CET1 levels – referring to the capital cushion that underpins a bank’s loans – Mr 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% fall in pre-tax profits to £581 million.
Barclays UK also saw a 3% drop in income and a 5% increase in operating costs due to increased investment, as well as a 13% rise in credit impairment charges.
Its international business, meanwhile, saw pre-tax profits rise 4% to £1.4 billion and operating expenses drop 5%, though income fell 8% to £3.8 billion.
Barclays said currency movements were partly to blame, given the US dollar’s depreciation against the stronger pound.
The bank’s total income for the first quarter fell 8% to £5.3 billion from £5.8 billion last year.
Barclays also highlighted the recent launch of its ring-fenced bank – having formally transferred its retail customers to a separate unit as part of new UK regulations meant to protect consumer cash from investment banking risks nine months ahead of the 2019 deadline.
“Together with the extensive restructuring completed last year, Barclays is now well-positioned to deliver strong earnings going forward and remains confident of achieving its returns and cost targets. Barclays reiterated the intention to pay a 6.5p dividend for 2018, subject to regulatory approvals,” the bank said.
The lender did not provide further details surrounding a fine looming over its chief executive after regulators found he had allegedly breached conduct rules by attempting to identify a whistleblower in 2016.
Warning notices issued by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) earlier this month allege that Mr Staley’s action’s violated rules that require an individual “to act with due skill, care and diligence”.
The bank stressed that regulators are not alleging that the Barclays boss acted with a lack of integrity or that he was not fit to continue in his role as chief executive.
The size of the proposed penalty has not been disclosed, but Mr Staley was given 28 days to respond to the warning notice.