Strong results from Barclays overshadowed by Epstein investigation

The banking giant’s activist investor base could ask for new leadership

Article updated: 13 February 2020 10:00am Author: Helal Miah

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  • This morning’s results seem on first impressions pretty good, group profits before taxes were up by roughly 25% to £4.4bn, without the litigation and PPI charges this would have been even higher at £6.2bn
  • Welcome news on costs too with the cost-to-income ratio now at 63% compared to last year’s 66%
  • Shares drop 3% in early trading which may be down to a couple of factors including the risk that it may not meet its 10% ROE target for 2020 due to low interest rates and weaker economic activity
  • Jes Staley’s links with the disgraced financier Jeffrey Epstein maybe the other reason for a cloud over the share price as it emerged that the Bank of England and the FCA are to investigate his links
  • Recommendation: We continue with our cautious ‘Hold’ recommendation for investors looking for a balanced return and willing to accept a medium level of risk

This morning, Barclays has released results that appear to be pretty good; group profits before taxes were up by roughly 25% to £4.4bn and, without the litigation and PPI charges, would have been even higher at £6.2bn. On costs there was welcome news too, with the cost-to-income ratio now at 63% compared to last year’s 66%.

However, the share this morning has reacted poorly, down by roughly 3% at the open, possibly down to a couple of factors. Firstly, the management commentary suggests that it may be difficult to achieve the 10 return on equity in 2020, given the low interest rate environment and general slow growing global economy. Also, Jes Staley’s links with the disgraced financier, Jeffrey Epstein may be the other reason for a cloud over the share price as it emerged that the Bank of England and the Financial Conduct Authority are to investigate his links.

While these results are somewhat encouraging, we still remain wary of the British universal bank. It’s still involved in many litigation related issues and still needs to get its act together – this morning’s news about its CFO won’t help it shake off its past. It may get to the point where investors will cry out for a cleaner and less controversial leadership. We continue with our cautious ‘Hold’ recommendation for investors looking for a balanced return and willing to accept a medium level of risk.


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.

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Helal Miah

Investment Research Analyst

After graduating with an economics degree from University College London, Helal started his career within private banking at Smith & Williamson Investment Management and later held analyst and fund manager roles with the Industrial Bank of Japan, Schroders and Mitsubishi Corporation. He is a chartered fellow of the Chartered Institute for Securities & Investment.