Barclays reports profit fall after hit from costly US trading error

A branch of Barclays Bank is seen in London, Britain, on February 23, 2022.

Peter Nicholls | Reuters

Barclays saw a drop in second-quarter profit on Thursday after taking a significant provision linked to a costly trading error in the US

The British bank reported a net profit of 1[ads1].071 billion pounds ($1.30 billion) attributable to shareholders, meeting analysts’ expectations of 1.085 billion pounds, according to Refinitiv. However, it marked a decrease of 48% from the same period the previous year.

Barclays took £1.9bn of lawsuits and conduct charges for the first half, including a £1.3bn charge linked to what the bank calls “over-issuance of securities” in the US

The British bank announced earlier this year that it had sold $15.2bn more in US investment products – known as structured notes – than it was allowed to.

The £1.3bn in litigation and conduct charges booked in the second quarter was “significantly offset”, according to the bank, by a hedge which generated £758m of income.

They include the cost of buying back the excess notes and an estimated £165m fine from the SEC.

The allegations, along with the strengthening of the dollar against the British pound, led Barclays to raise its forecast operating costs for the full year to £16.7bn from an earlier outlook of £15bn.

Other highlights for the quarter include:

  • Group revenue up to £6.7bn, from £5.4bn a year ago.
  • The CET 1 ratio, a measure of the banks’ solvency, comes in at 13.6%, down from 13.8% in the first quarter.
  • Total operating costs were £5 billion, up from £3.7 billion in the second quarter of 2021.

Barclays shares will begin Thursday’s trade down more than 15% on the year due to wider concerns over interest rates, inflation and a slowdown in growth.

Chief executive CS Venkatakrishnan (known as Venkat) said the bank had achieved a “strong first half”, with group revenue up 17% and a return on tangible equity of 10.1%.

“The broad-based revenue growth that we achieved in the first quarter continued across all three operating businesses into the second quarter,” Venkat said.

“Our results in the first half of the year demonstrate the resilience and benefit that diversification at all levels brings, both across the bank and within our businesses.”

Venkat took over the bank’s reins in November 2021 after longtime CEO Jes Staley stepped down following an investigation by regulators into his relationship with Jeffrey Epstein.

This is news and will be updated soon.

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