Restructuring Barclays Reports Sharp Rise In "Core" Attributable Profit

Tom Burroughes Group Editor London 27 April 2016


The UK-listed bank reported Q1 results, pointing out that its "core" results are improving significantly as it restructures business operations and cuts costs.

Barclays, the UK-listed bank that has been selling off business units around the world in a cost-cutting and consolidation drive, today said that first-quarter profits, attributable to shareholders, fell 7 per cent year-on-year to £433 million ($631 million).

Pre-tax profit for the three months ending 31 March fell 25 per cent to £793 million, it said in a statement. A number of other UK lenders are due to report results this week.

The cost/income ratio for the latest quarter was 76 per cent, up from 73 per cent a year earlier.

The heavy restructuring to the bank meant it gave “core” and “non-core” results. Core profits, attributable to shareholders, surged 53 per cent year-on-year to £950 million; the core cost/income ratio was 62 per cent, down from 67 per cent.

Shares in the bank were up around 4 per cent in early-morning trade in London.

The bank no longer provides specific financial results for its wealth and investment segment. However, referring to its core results, Barclays said that wealth, entrepreneurs and business banking (WEBB) income fell by 2 per cent year-on-year to £393 million, as the lower equity market drove reduced wealth income.

In recent weeks, Barclays has sold its private banking arms in Hong Kong and Singapore, and is in the process of cutting back some services in locations such as Gibraltar, Malta and Cyprus. It has sold its private bank in the US and intends to scale back its operations in Africa, a region where it has had a presence for more than a century. The bank has sought to slash costs and restructure its business to achieve more sustainable profits and reduce risk exposures.

"This quarter we have made good early progress against the strategy update we announced on 1 March. It is the first set of results as a transatlantic consumer, corporate and investment bank operating under our new configuration of Barclays UK and Barclays Corporate & International, and they show a core business performing well in a challenging environment,” said James Staley, chief executive of Barclays.

“Core RoTE is 9.9 per cent, within which Barclays UK posted an impressive 20.5 per cent return on tangible equity. We can see clear growth opportunities, such as in our consumer, cards and payments business, in which we want to continue to invest. The performance of our corporate and investment bank was relatively resilient in a tough quarter, but there is more we must do to improve returns, and we are focused on management actions to do so,” he continued.

The bank is continuing to seek cost cuts and is on track to achieve 2016 guidance for the core business of £12.8 billion, and its longer-term target of a group cost to income ratio under 60 per cent, he said.

“On Africa, we continue to explore opportunities to reduce our shareholding to a level that achieves regulatory deconsolidation, including capital market and strategic options, and we are pleased with the level of indicative interest in what is a high quality business. Barclays Africa is an important partner, and we are working closely with local management, including on the planning for the operational separation of the two businesses, in a way that will preserve value for shareholders in both groups,” he said.

Since the start of the year, Barclays has moved towards quitting investment banking in nine countries, he said.


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