A £900m charge for US tax changes, litigation bills, cost of exiting Africa and Carillion collapse all blamed
Hefty charges related to Donald Trump’s corporate tax changes, the cost of exiting Africa, the collapse of Carillion and legal battles pushed Barclays nearly £2bn into the red last year.
Chief executive Jes Staley, who hailed a year of “considerable strategic progress”, collected a pay package of £3.9m, down from £4.2m, with his annual bonus cut to £1.07m from £1.3m and benefits also down, while his salary stayed at £2.4m.
The group reported an after-tax loss of £1.9bn for 2017, against a net profit of £1.6bn the previous year, largely due to a one-off US tax charge of £900m and a £2.5bn loss on the sale of the African business. It also took a £127m hit from the collapse of construction group Carillion.
Stripping out these one-off costs, Barclays posted a pretax profit of £3.5bn, up 10%. UK profits were broadly flat at £1.7bn, with income down 2%.
The company more than doubled its dividend to 6.5p for 2018 and signalled future share buybacks, sending its share price 5.3% higher.
However, Barclays’ corporate and investment bank struggled, with profits sliding 22% to £2.1bn. The firm still paid out bonuses of £1.5bn to its bankers, down just 2% from 2016. Overall staff pay fell to £7.1m from £7.4m.
Staley has slashed costs by closing bank branches and laying off thousands of people. The restructuring is now complete, he said.
Hargreaves Lansdown analyst, Laith Khalaf, said: “Revenues at the UK bank have actually flatlined, while the international division is flagging. In particular the investment bank looks like a casino where the house isn’t winning. Revenues fell despite an appreciation in the dollar last year, which doesn’t bode well for the weaker dollar environment we now find ourselves in.”
Barclays set aside £1.2bn to cover costs from fines and litigation, including £700m for payment protection insurance (PPI), taking its total bill related to the PPI mis-selling scandal to £9.1bn.
The FCA has just started an investigation into Barclays’ debt collections in relation to unsecured lending from July 2015 and “whether or not it paid due consideration to the interests of customers in default and arrears”.
Staley said the bank had made good progress in putting most of its legal battles behind it, including the PPI and Libor scandals. This leaves two major issues: Barclays’s fight with the Department of Justice (DOJ) in the US courts over a decade-old mortgage bond mis-selling scandal; and the group’s dealings with Qatar during its emergency fundraising in 2008, which are being investigated by the UK’s Serious Fraud Office, the Financial Conduct Authority (FCA) and US authorities.
The SFO is investigating a $3bn loan provided by Barclays in November 2008 to the state of Qatar, at a time when Qatari and other investors bought shares in the bank to prop it up at the peak of the financial crisis.
The SFO has also charged Barclays’ parent company, its ex-chief executive, John Varley, and three former senior bankers with offences linked to the bank’s £11.8bn emergency fundraising. A trial is due to begin next January.
If found guilty, the bank could face regulatory penalties, including withdrawal of its banking licences. This would not affect Barclays’ UK high street operations because they are being transferred to a new company as part of the ringfencing of retail banking in Britain. However, investment banking, corporate lending and international operations would be hit.
Staley said Barclays hoped to resolve both issues “in due course”.
Staley himself is under investigation by the FCA, the City watchdog, and the Bank of England’s Prudential Regulation Authority for trying to unmask a whistleblower within Barclays’ staff. The bank had said his bonus would be “very significantly cut”.
Neil Wilson, senior market analyst at ETX Capital, said: “Staley’s future remains a doubt ... Meanwhile, a far more serious threat looms in the shape of the SFO’s investigation into Barclays’ 2008 emergency fundraising.”