Barclays reports profit fall after impact of costly US trading error

A branch of Barclays Bank is seen in London, Britain on February 23, 2022.

Peter Nicholls | Reuters

Barclays saw second-quarter profit fall on Thursday after taking a substantial provision related to a costly trading error in the US

The British bank reported net profit of 1.071 billion pounds ($1.3 billion) attributable to shareholders, meeting expectations of 1.085 billion pounds expected by analysts, according to Refinitiv. However, it marked a drop of 48% compared to the same period of the previous year.

Barclays took £1.9bn of litigation and conduct charges in the first half of the year, including a £1.3bn charge related to what the bank calls “securities over-issuance” in the US

The British bank announced earlier this year that it had sold $15.2 billion more in US investment products, known as structured notes, than it was allowed to.

The £1.3bn in litigation and conduct charges recorded in the second quarter were “substantially offset”, the bank said, by a hedge that generated £758m of income.

They include the cost of buying back the excess notes and an estimated £165m monetary penalty to the SEC.

Barclays also set aside £165m to settle an investigation into the use of communication tools by financial sector staff with regulators.

The charges, along with the appreciation of the dollar against the British pound, led Barclays to raise its forecast operating expenses for the full year to 16.7 billion pounds from an earlier forecast of 15 billion pounds.

Other highlights of the quarter include:

Group revenue up to £6.7bn from £5.4bn a year ago. The CET 1 ratio, a measure of bank solvency, came in at 13.6%, down from 13.8% in the first quarter. Total operating expenses were £5 billion, an increase. of £3.7 billion in the second quarter of 2021.

Barclays shares will start trading on Thursday up more than 15% for the year amid broader concerns about interest rates, inflation and a slowdown in growth.

Chief executive CS Venkatakrishnan (known as Venkat) said the bank had achieved a “solid first half”, with group revenue up 17% and a return on tangible equity of 10.1%.

“The broad-based revenue growth we achieved in the first quarter continued across all three operating businesses in the second quarter,” Venkat said.

“Our performance in the first half shows the resilience and advantage that diversification brings at all levels, both in the bank and in our businesses.”

Venkat took over the reins of the bank in November 2021 after CEO Jes Staley resigned following an investigation by regulators into his relationship with Jeffrey Epstein.


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About the Author: Chaz Cutler

My name is Chasity. I love to follow the stock market and financial news!