Barclays profits fall 14% on admin blunder and fees slump

Bank says it docked top executives' pay by a combined £1 million to reflect the regulatory missteps

Barclays has posted a 14 per cent drop in pre-tax profits. Photographer: Chris Ratcliffe / Bloomberg
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Barclays has posted a 14 per cent fall in annual profits, following provisions it made for costs relating to an administrative blunder that saw it oversell securities in the US, as well as a slump in deal fees earned by its investment banking arm.

The British bank reported a pre-tax profit last year of £7 billion ($8.5 billion), down from £8.2 billion the year before and just below analysts' forecasts.

Fines and restitution to customers from an administrative error that led to overstepping of agreed limits on sales of investment products in the US cost Barclays £1.6 billion.

Docked executive pay

The bank added that it had docked top executives' pay by a combined £1 million to reflect the regulatory missteps.

Meanwhile, fees from advising on debt and equity fundraising plunged by almost two-fifths year on year, contributing to a 23 per cent slump in pre-tax profit at its international division to £5 billion.

In addition, Barclays bottom line was weighed upon by the deteriorating UK economy picture, as the bank made £1.2 billion in credit impairment charges in its accounts.

On the upside, Barclays reported revenues from fixed income, currencies and commodities trading, its traditional strength, rose 65 per cent to £5.7 billion, beating US rivals Morgan Stanley and Goldman Sachs.

'Bitterly disappointed the market'

"Barclays has bitterly disappointed the market with its full year numbers," said Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown.

"Profits have been stunted partly because of a big increase in litigation costs relating to the over-issuance of US securities.

"This costly mistake has been known about for some time, but these are now the hard consequences biting the bottom line.

"Barclays is more than able to stomach this financially, the wider-reaching difficulties come from reputational damage.

"The tolerance margin for a similar mistake is now very thin," she added.

Richard Hunter, head of markets at Interactive Investor, said that the recent 19 per cent spike in Barclays' share price could "indicate changing fortunes for the bank, with some of the hits which it has had to take now moving towards the rear view mirror".

Even though the bank's shares underperformed the wider London FTSE 100 blue chip index over the past year, Mr Hunter said there "is little doubting either the financial strength or the breadth of income streams which the bank has at its disposal, and the market consensus of the shares as a buy will likely remain intact as investors look through the current challenges to the prospects of tomorrow”.

Barclays is the first of the big British banks to report its annual earnings this week.

Updated: February 15, 2023, 9:33 AM