Barclays Profit Takes Hit From Asset Sales -- 2nd Update
July 29 2016 - 4:35AM
Dow Jones News
By Max Colchester
LONDON-- Barclays PLC said first-half net profit slipped nearly
a third as the bank sucked up losses selling down unwanted assets
and put aside cash to cover an uptick in bad loans.
Barclays Chief Executive Jes Staley played down fears that the
bank would be hit by Brexit, saying that he saw "no reason" to
adjust the strategy or the pace of its delivery in the wake of
Britain's vote to leave the European Union.
Shares in the bank rose more than 5% in early trading Friday, as
investors welcomed Barclays' progress in slimming down and
refocusing on its U.K. and U.S. businesses.
The process, which includes selling a stake in its African unit
and exiting much of Europe, has taken a toll on the bank's balance
sheet, generating GBP1.9 billion of pretax losses in the first six
months alone.
The so called "noncore" unit, which houses the extraneous
assets, should be closed by 2017, Mr. Staley said.
Total income was down 9% to GBP11 billion ($14.49 billion) in
the first six months of the year. Net profit fell to GBP1.1 billion
from GBP1.6 billion the year before.
The British bank's bottom line was also hit by rising
impairments in its credit card business and lending to oil and gas
companies. The bank tweaked the way its credit card models
impairments, which resulted in a 36% rise in impairments at its
Barclaycard unit. The bank put aside an extra GBP400 million to
compensate customers sold insurance products they didn't need.
Income at its U.K. retail business was flat for the year, with a
growth in personal banking hit by falling revenue at its profit
engine credit card business. Barclays' corporate and investment
bank saw profit before tax down 16% as revenue in equities slumped
and costs increased.
Nevertheless the investment bank held up better than many
analysts expected and the corporate and international unit beat
analysts' expectations.
The bank has been touted as a major loser from the Brexit vote
as its retail operations could come under pressure from a slowing
economy and it may have to shuffle its investment bank to service
some European clients.
Mr. Staley played down those worries, saying that dealing with a
rule forcing the segregation of investment and retail banking was
far more onerous than having to move operations to a subsidiary in
the EU. Nevertheless the bank raised a number of concerns including
a bigger risk of recession, higher trading volatility and fear that
leaving the EU could curtail the bank's access to the continent's
"talent pool." Demand for loans fell after the vote, Mr. Staley
said. "There has been a shock in demand for credit," he said.
"Let's see how it plays out over the next couple of months"
Write to Max Colchester at max.colchester@wsj.com
(END) Dow Jones Newswires
July 29, 2016 04:20 ET (08:20 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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