Barclays Net Profit Tumbles on Africa Write-Down -- Update
April 28 2017 - 3:33AM
Dow Jones News
By Max Colchester
LONDON-- Barclays PLC said its net profit fell by more than half
in the first quarter of the year, as the British bank's bottom line
was stung by the cost of shedding its African business.
Barclays said Friday that revenue rose 16% to GBP5.8 billion
($7.5 billion) compared with the same period a year earlier,
bolstered by strong growth at it cards business. Net profit was
GBP190 million, compared with GBP433 million a year earlier, as it
took an GBP884 million impairment against the value of its African
business.
The bank said its investment-banking income rose 7% in the
quarter, helped by an increase in debt trading. Profit before tax
more than doubled to GBP1.68 billion, boosted by a fall in the
value of the pound against the dollar. However, bad loans ticked up
nearly 20%, driven mainly by its U.S. credit-card unit.
Under Chief Executive Jes Staley's watch, the bank has looked to
reinvigorate its investment-banking unit, while shedding a host of
businesses around the globe. Mr. Staley said the bank was on track
to close its "noncore" unit, which houses Barclays's unwanted
assets, by the end of June.
"We are now just two months away from completing the
restructuring of Barclays," Mr. Staley said in a statement.
Several hurdles still remain. Barclays must still deconsolidate
its African business from its accounts. It has signed a separation
agreement with its African business, which must now be approved by
South African regulators. The write-down reflected the cost of
splitting the unit out and a fall in its share price as the South
African economy stuttered.
The rising impairments and the cost of separating the African
business had some analysts questioning whether Barclays will need
to tap shareholders for equity. "U.K. macro and South African
politics will dictate whether [Barclays] escapes another capital
raise," said Chirantan Barua, an analyst at Bernstein Research.
A series of litigation issues are also hanging over the bank.
Barclays is being sued by the U.S. Justice Department for its
alleged role in the sales of toxic mortgage-backed securities. It
is also being probed by U.S. and U.K. authorities over how it wooed
Middle Eastern investors to pump cash into the bank at the height
of the financial crisis. On Friday, Barclays said it expected the
U.K.'s Serious Fraud Office to make a decision soon on whether to
charge the bank.
Adding to the uncertainty, earlier this month Barclays disclosed
that U.K. regulators were probing Mr. Staley over his efforts to
unmask a whistleblower who complained about a hire the bank made.
Mr. Staley apologized to the bank's board. On Thursday, a prominent
proxy adviser recommended that shareholders abstain from voting for
his re-election.
Write to Max Colchester at max.colchester@wsj.com
(END) Dow Jones Newswires
April 28, 2017 03:18 ET (07:18 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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