Barclays Net Profit Tumbles on Africa Write-Down -- 3rd Update
April 28 2017 - 4:51AM
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 and
weaker-than-expected returns at its investment bank.
The lender, which is entering the final two months of a
restructuring program, said it was making good progress ditching
unwanted businesses. But shares in the bank fell 4% in morning
trading as investors questioned whether the refashioned franchise
would be capable of generating strong profits.
Under Chief Executive Jes Staley, Barclays embarked on a program
to double down on its investment bank and refocus on the U.K. and
U.S.
The bank said its investment banking income rose 7% in the
quarter compared with a year earlier, helped by an increase in debt
trading. But analysts said that jump missed expectations and fell
short of some U.S. competitors' performances. "We would have liked
to have done better," said Mr. Staley.
Total revenue rose 16% to GBP5.8 billion ($7.5 billion),
bolstered by strong growth at its cards business. Profit before tax
more than doubled to GBP1.68 billion.
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.
Several hurdles still remain. Barclays must still extricate its
African business from its accounts. It has signed a separation
agreement, which must now be approved by South African regulators.
The bank on Friday took an GBP884 million impairment on the unit's
value, reflecting the cost of splitting it out and a fall in its
share price as the South African economy stuttered.
Net profit at Barclays was GBP190 million, compared with GBP433
million a year earlier. Meanwhile, bad loans ticked up nearly 20%,
driven mainly by its U.S. credit-card unit.
The news of rising impairments and the charge in Africa led some
analysts to question 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.
Adding to the uncertainty, earlier this month Barclays said 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. Mr. Staley said he hadn't tendered his resignation
over the matter and that the board "unanimously supported me
continuing as CEO of the bank."
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 investigated 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. Serious Fraud Office to make a decision soon on
whether to charge the bank.
Write to Max Colchester at max.colchester@wsj.com
(END) Dow Jones Newswires
April 28, 2017 04:36 ET (08:36 GMT)
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