Barclays dragged to first quarter loss by giant United States penalty

Barclays dragged to first quarter loss by giant United States penalty

Barclays dragged to first quarter loss by giant United States penalty

The British bank said Thursday it made a net loss of £764 million ($1.06 billion) in the first quarter, compared with a profit of £190 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.

Improved income at its investment bank helped Barclays report a better than expected first quarterly pre-tax profit of 1.7 billion pounds ($2.4 billion) excluding the legal and conduct charges, and the bank said it still intends to pay a dividend of 6.5 pence per share in 2018.

The lender's capital position weakened as a result of the litigation and conduct charges with the common equity tier 1 ratio falling to 12.7% at March 31 from 13.3% at the end of 2017.

While the penalty was substantial, this settlement represents a major milestone for Barclays, putting behind us a significant decade-old legacy matter.

"Not such great news was a reduction in Barclays" regulatory capital.

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"Recent conduct matters haven't all been negative for Barclays, after all its CEO Jes Staley has been deemed fit and proper to run the business, despite his interference in a whistleblowing case", said Laith Khalaf, senior analyst at Hargreaves Lansdown.

"Stripping out these setbacks, performance has been a disappointment rather than a disaster, which the headline figures by themselves might suggest".

Barclays said income from its markets business in the first quarter rose 8 percent compared with a year ago, or 21 percent in USA dollar terms as the bank suffered in comparison with US peers from earning much of its revenues in sterling.

The PPI charges dragged on returns from its United Kingdom business, which suffered a 17% fall in pre-tax profits to £581 million, while its global business saw pre-tax profits rise 4% to £1.4 billion.

Barclays said currency movements were partly to blame, given the United States dollar's depreciation against the stronger pound.

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The bank also had the news this month that Barclays boss Jes Staley will be fined after an investigation into his attempts to identify a whistleblower, but he would not face further sanctions.

"Together with the extensive restructuring completed previous year, Barclays is now well-positioned to deliver strong earnings going forward and remains confident of achieving its returns and cost targets", the statement said.

The size of the proposed penalty has not been disclosed, but Mr Staley was given 28 days to respond to the warning notice.

"In a reversal of fortune, the investment bank delivered a positive performance, with the equity trading business ticking up thanks to increased market volatility, which clearly prompted some portfolio shuffling amongst investors. It will be between management and the team at Sherborne, and we look forward to a very constructive dialogue".

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