28th Apr 2022 10:05
(Alliance News) - Barclays PLC on Thursday reported a drop in first quarter profit as the bank started to rebuild credit impairments and felt the hit from over-selling certain securities to US investors.
Income was on the rise, however, as the company's investment bank continues to offer the lender a reprieve.
Shares in Barclays were 2.3% higher in London on Thursday morning at 145.14 pence each.
Chief Executive CS Venkatakrishnan said Barclays put forward a "strong" performance in the first quarter.
"Our income growth was driven partly by Global Markets, which has been helping clients navigate ongoing market volatility caused by geopolitical and economic challenges including the devastating war in Ukraine, and by the impact of higher interest rates in the US and UK." Venkatakrishnan - whose initials stand for Coimbatore Sundararajan - added.
In the three months to March 31, Barclays recorded pretax profit of GBP2.23 billion, slipping from GBP2.40 billion in the same period the year prior.
The bank set aside GBP141 million in credit impairment charges, up sharply from GBP55 million the year before. Barclays blamed the growth in credit losses on "low delinquencies and a benign credit environment, with unsecured lending provision levels remaining appropriate in light of inflationary headwinds."
Total income rose 10% to GBP6.50 billion from GBP5.90 billion, with net interest income surging 26% to GBP2.34 billion from GBP1.85 billion. Group net fee, commission & other income increased 3% to GBP4.16 billion from GBP4.05 billion.
Barclays UK's net interest margin improved to 2.62% from 2.54% - primarily driven by the rising interest rate environment in the UK - aiding the bank's net interest income growth.
Barclays UK total income was up 5% to GBP1.65 billion, with net interest income and net fee income both up 5%, too.
Barclays International saw total income grow 10% to GBP4.82 billion, as its Corporate & Investment Bank recorded 10% income growth thanks to Global Markets income jumping 26%, offsetting Investment Banking fees slumping 25%.
Total group operating costs increased to GBP3.59 billion from GBP3.55 billion, with the bank including about GBP540 million of conduct charges following the over-issuance of securities by Barclays Bank PLC in the US.
"Barclays has commissioned a review by external counsel of the facts and circumstances relating to the matter and is assisting regulators with their inquiries and requests for information," Barclays explained.
"Barclays Bank PLC has elected to make a rescission offer to certain purchasers of the affected securities issued in excess of the registered amount, which is expected to commence during the second quarter of 2022. Barclays remains committed to its structured products business in the US and expects Barclays Bank PLC to file a new shelf registration statement with the SEC, and resume issuance of structured notes, during the second quarter of 2022."
As a result, the bank's cost-to-income ratio worsened to 63% from 61% the year before. Barclays CET1 ratio also worsened, slipping to 13.8% from 14.6%.
Barclays noted it has upped its risk-weighted assets by GBP2.8 billion in hedging arrangements designed to manage the risk of the rescission offer.
Looking ahead, Barclays said it is "well placed" due to its "diversified" income stream and rising interest rates.
Venkatakrishnan added: "Our diversified income streams, focus on costs and a CET1 ratio of 13.8% provide a strong platform to deliver our target of a greater than 10% return on tangible equity for 2022.
"We remain focused on our three strategic priorities as the year progresses: delivering next-generation, digitised consumer financial services, producing sustainable growth in the Corporate & Investment Bank, and capturing opportunities as we transition to a low-carbon economy."
By Paul McGowan; [email protected]
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