Barclays’ international business helps offset hit from charges totalling almost £2bn

What does Barclay's update mean for investors?

Article updated: 26 April 2018 12:00pm Author: Ian Forrest

  • Barclays Q1 revenues fell 8% with profits hit by charges relating to alleged mis-selling of US residential mortgage backed securities and further PPI provisions
  • Market reaction reflected the fact results were a mixed bag opening down then recovering quickly
  • The Share Centre recommends Whitbread as a ‘hold’ for medium risk investors

Barclays today reported an 8% drop in first quarter revenues to £5.36bn and a £236m loss before tax compared to a £1.68bn profit last time. The company said that profits were hit by charges totalling almost £2bn to cover a number of factors including the settlement with the US authorities over alleged mis-selling of residential mortgage-backed securities and a further provision for PPI mis-selling. Lower profits in the UK were however, offset by a better than expected performance in the international business where the investment bank saw a welcome 49% rise in profits. Investors should also appreciate that despite the key capital ratio declining to 12.7% the bank said it was confident that it would return to 13% in good time and confirmed that it intends to pay a 6.5% dividend in 2018.

Group Chief Executive Jes Staley remained relatively optimistic, stating today that this had been a ‘significant quarter’ for the group as its new operating model proved it was capable of improving return to shareholders. Staley was also keen to reiterate that Barclays performance over this quarter increased confidence for the group in regards to meeting group RoTE targets of greater than 9% in 2019, and greater than 10% in 2020.

The reaction in the market today reflected the fact that the results were a mixed bag in that after opening down 2% the shares quickly recovered to Wednesday’s closing price. The improvement in profitability at the corporate and investment banking business is welcome and the bank increased its attributable profit, which strips out the charges, from £209m to £1.2bn. However, the decline in UK revenues is a concern and as a result, our overall rating remains a ‘hold’.

All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

Ian Forrest portrait photo
Ian Forrest

Investment Research Analyst

Ian’s background in investments, financial journalism and research has seen him advising private investors on equities and helping to manage portfolios. His qualifications include the Certificate in Financial Planning and the Chartered Institute for Securities & Investment’s Investment Advice Diploma.