BARC Barclays Plc

By Simon Clark 

LONDON -- Barclays PLC posted a profit in 2020 as buoyant securities trading made up for a lackluster performance in the U.K., where the bank expects pent-up savings to give the economy a boost as the coronavirus pandemic wanes.

Net profit at the London-based bank fell 38% from a year earlier to GBP1.53 billion, equivalent to $2.12 billion. Profit at Barclays's corporate and investment bank rose 29% to GBP2.55 billion.

Barclays shares traded 2% lower on the results. The bank said it intends to pay a dividend for 2020 and buy back up to GBP700 million of shares. The proposed dividend of one pence a share was less than some investors were expecting.

The results support the strategy of Barclays Chief Executive Jes Staley, who has fended off demands from activist investor Edward Bramson to scale back the investment bank. Mr. Bramson's Sherborne Investors says it owns 5.8% of Barclays. European lenders with large securities-trading units, such as Deutsche Bank AG and BNP Paribas SA, have fared better in the pandemic.

Barclays is the U.K.'s second-largest lender by assets after HSBC Holdings PLC, operating a large domestic retail and commercial bank as well as a trans-Atlantic investment bank that competes with the likes of Goldman Sachs Group Inc. and Morgan Stanley.

The investment and consumer banks "act differently during an economic cycle," Mr. Staley said on a media call Thursday. "That enabled Barclays to be profitable every quarter during the year."

Revenue from Barclays's markets unit, which trades fixed-income securities, equities and derivatives, rose 45% to GBP7.61 billion. Its cards-and-payments unit lost GBP388 million in 2020 on impairments and lower economic activity. Barclays shares have risen 2% this year after dropping 18% in 2020.

British banks have been hit hard by the economic impact of Covid-19. The U.K. recorded the largest economic contraction among the world's advanced economies last year. Prospects are improving with the rollout of a nationwide vaccination program but uncertainty persists, in part because of added challenges because of the country's exit from the European Union.

Consumers reduced credit-card debt and boosted savings because of fear caused by the pandemic, Mr. Staley said.

"Deposits went through the roof," he said. "Once people start to regain confidence they're going to spend it and that, I think, is what we believe will happen and will generate quite a strong economic recovery sometime in the second half of this year."

Nevertheless, the toll of the pandemic on borrowers led Barclays to set aside GBP492 million in the last three months of the year to cover bad loans, bringing the total for the year to GBP4.84 billion, more than double the amount for 2019.

Despite the drop in profit for the year, the bank paid 6% more in bonuses in 2020 than the year earlier, a total of GBP1.58 billion. Mr. Staley said the bonuses were appropriate compensation for the company's bankers and traders. "The profitability was led by our wholesale business and we need to be responsive to that," he said.

Banks across Wall Street are having to walk a fine line on bonuses, weighing very strong performance during a year of widespread economic turmoil.

As CEO of the U.K.'s biggest investment bank, Mr. Staley said he wasn't concerned that Britain's departure from the EU would damage London's finance industry. So far this year, Amsterdam has overtaken London in terms of the average value of shares traded a day.

"I wouldn't overreact to the stock trading coming out of Amsterdam," Mr. Staley said. "The main pool of capital that is managed out of London today is pretty much unchanged from where it was six months ago or a year ago. I don't think you have an exodus that should make people stand up and say 'Oh my God, does London have a problem?'"

Mr. Staley is under scrutiny for his professional relationship with a deceased former client from his time working at JPMorgan Chase & Co., convicted sex offender Jeffrey Epstein. U.K. financial regulators said last year that they were investigating the relationship. Mr. Staley declined to comment on the investigation Thursday. The U.K.'s Financial Conduct Authority declined to comment.

In October, Mr. Staley, 64, said he intended to remain at Barclays for "another couple of years."

Write to Simon Clark at simon.clark@wsj.com

(END) Dow Jones Newswires

February 18, 2021 06:02 ET (11:02 GMT)

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