Barclays Posts Loss, Weighed Down by U.S. Settlement -- 2nd Update
April 26 2018 - 05:08AM
Dow Jones News
By Max Colchester
LONDON -- Barclays PLC Chief Executive Jes Staley faced down
investor pressure over its investment bank by boosting revenue at
the unit in the first quarter, even as a settlement with the U.S.
Justice Department pushed the British lender into an overall
loss.
Under pressure from a newly arrived activist investor, Mr.
Staley said Thursday's results were "a validation of the strategy
that we laid out two years ago," reiterating that the lender can
thrive with a diversified business stretching from credit cards to
equity derivatives.
The bank said it made a net loss of GBP764 million ($1.06
billion) in the first quarter, compared with a profit of GBP190
million a year earlier, after it agreed to pay $2 billion to the
Justice Department to settle a claim for selling toxic
mortgage-backed securities before the financial crisis. Total
income totaled GBP5.4 billion in the quarter, down 8% from a year
earlier, when it made a gain on a business disposal.
Despite the reassurances, Barclays's management is still
fighting to prove that it can squeeze strong returns from its
trading unit. Activist investor Sherborne Investors Management LP
took a stake in the lender earlier in the year, its fund backed by
a number of blue-chip British investors.
Barclays shareholders have questioned whether the bank has the
balance-sheet heft to take on larger U.S. rivals in investment
banking and whether the capital plowed into the trading unit
wouldn't be better deployed in more vanilla businesses. Mr. Staley
said he would meet with Sherborne's management in the coming
weeks.
The corporate and investment bank reported a 1% gain in revenue,
as choppy markets boosted trading activity. Equities income rose
28% -- largely keeping pace with its U.S. rivals -- but revenue
fell 2% in its bond-trading unit. The bottom line at the unit was
helped by a fall in costs and much-lower provisions for bad
loans.
A stronger-than-anticipated performance at Barclays's corporate
and investment bank should ease immediate pressure on the executive
to dramatically alter the direction the bank is going in, analysts
say.
"The investment bank performance was far better than expected,"
said Joseph Dickerson, an analyst at Jefferies.
Shares in Barclays were broadly flat in early London trading.
Barclays said it would increase its capital ratio in "good time"
and reiterated a pledge to return cash to investors and increase
dividends.
The bank also said it was again expanding its investment-banking
footprint, reopening an office in Australia. It will also continue
to look at reallocating capital into the unit from other
businesses.
Barclays's retail division, meanwhile, posted a much smaller
profit before tax than a year earlier, hit by a provision to
reimburse customers who were sold insurance products they didn't
need. Across the franchise, bad loans were down significantly due
to improved economic forecasts in the U.S.
Adding to the complicated turnaround was a probe into Mr.
Staley's efforts to unmask a whistleblower. Last week, U.K.
regulators said he could keep his job but will be subject to a
fine. Mr. Staley said he accepted where the regulators "came out,"
adding that it "now it's time to focus on managing the bank."
Write to Max Colchester at max.colchester@wsj.com
(END) Dow Jones Newswires
April 26, 2018 04:53 ET (08:53 GMT)
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