LONDON: Profits missed estimates at Barclays last year, the bank revealed, as it set aside £150m for Brexit and paid out billions of pounds in misconduct and litigation charges related to its role in the financial crisis.
Profit before tax dipped one per cent to £3.49bn, down from £3.54bn in 2017 after the bank’s £1.4bn settlement with the US Department of Justice over residential mortgage-backed securities sold in the run up to the financial crisis.
It also paid out another £700m in payment protection insurance (PPI) claims.
Overall attributable profit hit £1.4bn, seeing Barclays back in the black after 2017’s £1.92bn loss.
Net operating income increased five per cent year on year to £19.67bn even as total operating expenses rose five per cent to £16.24bn.
Basic earnings per share soared to 9.4p after 2017’s loss of 10.3p per share, while the dividend more than doubled to 6.5p, up from 3p last year.
Barclays’ profit missed forecasts as it set aside £150m for any potential fallout from Brexit, in contrast to Lloyds Banking Group’s bullish statements yesterday on the health of the UK economy.
“That could prove to be insufficient or over-cautious, depending on proceedings in Westminster and Brussels,” said Laith Khalaf, senior analyst at Hargreaves Lansdown.
The bank’s international division, which houses Barclays’ investment bank, saw profit before tax grow £500m to £3.8bn, broadly in line with analyst expectations.
But earnings were stung by more litigation over the 2008 crash and more payments ahead of August’s deadline for PPI claims. Stripping out these charges Barclays said its profit before tax would have grown 20 per cent to £5.7bn.
Barclays said that its focus now will be on making more returns to shareholders and investing in the business.
“The resumption of a 6.5p dividend is symbolically as well as financially significant,” Khalaf added. “That’s the level the dividend stood at before it was halved when Jes Staley took over, and suggests the bank is now back to business as usual.
Group chief executive Jes Staley said: ”2018 represented a very significant period for Barclays.
“Having resolved major legacy issues and reduced the drag from low returning businesses, we started to see the earnings potential of the bank, as the strategy we have implemented began to deliver. This was evident in the improved performance across the group compared to 2017.
“Going forward the principal calls on future earnings should now be returns to shareholders and investing to grow the business. We will use the strong capital generation of the bank to return a greater proportion of those earnings to shareholders by way of dividends and to supplement those dividends with additional returns, including share buybacks. I am optimistic for our prospects to do more in 2019 and beyond.”
Meanwhile, Former Barclays chair Marcus Agius told a court in London that he was unaware of an agreement by the bank to pay Qatar £280m as it embarked on an emergency fundraising at the height of the financial crisis.
The Serious Fraud Office has charged former Barclays chief executive John Varley and senior bankers Richard Boath,Tom Kalaris and Roger Jenkins with fraud in connection with two 2008 emergency fundraisings that raised £12bn for the bank.
The four, who deny the charges, are accused of making secret payments to Qatar to facilitate the investments under the guise of services agreements.
Agius, who is not accused of any wrongdoing, was asked if he had seen an advisory services agreement promising Qatar £280m dated 31 October 2008, around the time of the second emergency fundraising Qatar participated in.
“Absolutely not,” he said, “I saw the document for the first time some years after.”
He added: “Not only did I not see the document, I was not aware of its existence.”
Agius then clarified that he first saw the document in 2012, four years on from the 2008 fundraising.
He also said he was unaware of how the document was negotiated or how the figure of £280m was arrived at.
Agius, who chaired Barclays between 2007 and 2012, is the first senior banker to appear as a witness in a trial connected to the 2008 financial crisis.
Barclays raised money from Qatar in two fundraisings in June and November 2008 to bolster its capital ratio as the credit crunch rocked the global economy.
The bank chose to raise funds privately, avoiding a state bailout. Prosecution lawyers told the court last month: “It is no exaggeration to say that Barclays’ future as an independent bank was in jeopardy in September and October of 2008.”
Jenkins and Varley deny two counts of fraud by false representation connected to two fundraisings in June and October 2008. Boath and Kalaris both deny one count over the June fundraising. The trial continues.