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Barclays beats expectations but suspends buybacks after U.S. trading blunder

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Barclays Bank branches can be seen in London, Britain on February 23rd, 2022.

Peter Nicholls | Reuters

LONDON — Barclays on Thursday said had suspended its planned share buyback program on the back of a costly trading error in the U.S.

This comes after it posted an expectation-beating profit in the first quarter. Strong investment banking performances helped to drive income growth.

The British bank announced last month that it had sold $15.2 billion more in U.S. investment products — known as “structured notes” — than it was permitted to. Barclays said Thursday that it had postponed its share buyback program indefinitely and set aside a provision of £540 million as a result of the issue, which is currently being investigated by U.S. regulators. The bank had originally said it expected a hit of £450 million.

Barclays thinks it prudent to defer the start of the buyback program until these discussions are completed. [with the SEC]In its Thursday earnings release, the bank stated that all transactions had been finalized.

“Barclays continues to be committed to the Share Buyback Program and it would be our intention to launch the program as soon as possible following the resolution of all filing requirements and proper 20-F filings.”

Earnings

Barclays reported first-quarter net profit attributable to shareholders of £1.4 billion ($1.76 billion), above analyst expectations of £644 million, according to Refinitiv data. It marks an 18% decline from the first quarter of 2021, when net profit came in at £1.7 billion.

Group income rose 10% year-on-year to £6.5 billion, driven by strong corporate and investment banking earnings during a spike market volatility.

C. S. Venkatakrishnan, CEO, stated that the income increase was partly due to Global Markets. This company has helped clients deal with ongoing volatility in markets, including the devastation in Ukraine and the effects of rising interest rates in the US.

Additional highlights from the quarter include:

  • Total operating expenses increased to £4.11 billion, up from £3.58 billion in the first quarter of 2021, due to the rise in litigation and conduct charges resulting from the U.S. trading error.
  • CET1 ratio was 13.8% in Q2 2021, an indicator of bank solvency. This is down from 15.1% the previous quarter.
  • The bank reported that the return on tangible equity was 11.5%. This is down from 14.7% during the previous quarter. It also stated it would continue to aim for RoTE greater than 10%.

After a turbulent 2021 end, the results were announced. CEO Jes Staley resigning in November following an investigation by regulators into his relationship with Jeffrey Epstein. Venkatakrishnan succeeded him.

Due to wider worries about interest rates, inflation, and a slowdown of growth, share prices are down almost 22% this year.

This story is breaking, so please come back soon for more.

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