Barclays shares plunge 10% as profit falls
The bank's drop in profits was driven by increased provisions for bad debts and huge fines for wrongly sold securities in the United States.
By Hanna Ziady, CNN
Shares of Barclays tumbled nearly 10% Wednesday after the British bank reported a sharp drop in profit, driven by increased provisions for bad debts and huge fines for wrongly sold securities in the United States.
Barclays reported a net profit of £5.97 billion ($7.2 billion) for 2022, a 15% decline on the previous year. Shares were down 9.8% in late morning trade in London, before paring losses in the afternoon.
The bank said its earnings were affected by a £1.2 billion ($1.4 billion) credit impairment charge — money set aside to cover expected losses on loans — “reflecting macroeconomic deterioration.” Operating costs jumped 14% to £16.7 billion ($20 billion), on the back of an enormous increase in litigation costs and fines, which amounted to £1.6 billion ($1.9 billion).
The increase was primarily driven by a widely reported administrative error that resulted in the bank selling $17.7 billion worth of securities in the United States that had not been registered for sale with the US Securities and Exchange Commission (SEC).
Barclays agreed to pay $361 million to settle the charges from the SEC, according to a statement last year, and about $450 million to compensate investors.
‘Bitterly disappointed the market’
“Barclays has bitterly disappointed the market with its full-year numbers,” Sophie Lund-Yates, lead equity analyst at asset manager Hargreaves Lansdown, said in a note. “Profits have been stunted partly because of a big increase in litigation costs relating to the over-issuance of US securities.”
Income at the company’s corporate and investment bank increased 8% on the previous year to £13.4 billion ($16.1 billion). Meanwhile fee income at Barclays International, which houses its investment bank, slid 22% to £5.2 billion ($6.3 billion).
Investors may also have been disappointed by the announcement of a £500 million ($600.7 million) share buyback, adding to pressure on the stock. “Given the group’s capital position, there’s definitely an argument that more money could be funneled back to shareholders,” Lund-Yates said.
Barclays said total share buybacks amounted to £1 billion ($1.2 billion) in 2022. The bank declared a full-year dividend of 7.25 pence per share, a 20% increase on the previous year.
Despite the weaker than expected result, staff bonuses amounted to just over £1.2 billion ($1.4 billion) for the year, a decline of only 3% on 2021.
“We are cautious about global economic conditions, but continue to see growth opportunities across our businesses through 2023,” Barclays CEO C. S. Venkatakrishnan said in a statement.
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